Answered: A monopolist faces two demand curves in…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A monopolist faces two demand curves in two separate markets. The Market Demand in
the first market is P1=100-Q1 and in the second market it is P2=50-0.5Q2. The marginal &
average costs are constant at 10 (MC=AC=10). Find the Monopoly Price and Quantity in
each market. Find the Perfect Competition Price and Quantity in each market. Calculate
Profit, Social Welfare (Consumer and Producer Surpluses), and Dead Weight Loss in
both situations and in both markets.

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

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