A monopolist facing a demand p=1000 - 10Q has costs TC(Q) = 5Q^2 + 100Q. (a) What is the monopolist’s profit maximizing quantity and price? What is the induced DWL? (b) Suppose, on top of the costs above, the firm now also pays; (i) A flat fee of 1000 dollars, (ii) half of the profits, (iii) 150 dollars per unit sold, (iv) half of the revenue.
A monopolist facing a
(a) What is the monopolist’s profit maximizing quantity and price? What is the induced DWL?
(b) Suppose, on top of the costs above, the firm now also pays; (i) A flat fee of 1000 dollars, (ii) half of the profits, (iii) 150 dollars per unit sold, (iv) half of the revenue.
Separately for each of these 4 cases, calculate the profit maximizing price and quantity for the monopolist with these new augmented costs. Does any of these scenarios alter the DWL associated with the monopoly, compared to (a)? (c) Forget about (a) and (b), and consider a monopoly in general. Show on a single graph with general costs (
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