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You have been granted a monopoly in the avocado market. The market demand for avocados is Q = 2000 – 2P. Your cost %3D structure is such that your total costs are TC = 1000+ 400Q. (limit: whatever needed) What is your profit maximizing price and quantity? Explain this in words and show it graphically.

You have been granted a monopoly in the avocado market. The market demand for avocados is Q = 2000 – 2P. Your cost %3D structure is such that your total costs are TC = 1000+ 400Q. (limit: whatever needed) What is your profit maximizing price and quantity? Explain this in words and show it graphically.

Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter15: Monopoly
Section: Chapter Questions
Problem 8PA
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You have been granted a monopoly in the avocado market. The market demand for avocados is Q = 2000 – 2P. Your cost structure is such that your total costs are TC = 1000+ 400Q. (limit: whatever needed) What is your profit maximizing price and quantity? Explain this in words and show it graphically. What are the profit, producer surplus and consumer surplus? The government is thinking about breaking your monopoly into ten identical firms and giving ownership to 10 random people. Correspondingly, each firm would have a fixed cost of $1000 and a marginal production cost of $400 per unit. In this perfectly competitive environment, what would be the equilibrium price and quantity? Explain this in words and show it graphically. What are the profit per firm, producer surplus and consumer surplus that correspond to your answer to part d)? How much would you be willing to pay to keep the government from taking your monopoly away? Explain.
Transcribed Image Text:You have been granted a monopoly in the avocado market. The market demand for avocados is Q = 2000 – 2P. Your cost structure is such that your total costs are TC = 1000+ 400Q. (limit: whatever needed) What is your profit maximizing price and quantity? Explain this in words and show it graphically. What are the profit, producer surplus and consumer surplus? The government is thinking about breaking your monopoly into ten identical firms and giving ownership to 10 random people. Correspondingly, each firm would have a fixed cost of $1000 and a marginal production cost of $400 per unit. In this perfectly competitive environment, what would be the equilibrium price and quantity? Explain this in words and show it graphically. What are the profit per firm, producer surplus and consumer surplus that correspond to your answer to part d)? How much would you be willing to pay to keep the government from taking your monopoly away? Explain.
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