Microeconomics · free preview
The Monopoly Choice
The monopolist produces where marginal revenue equals marginal cost and prices off the demand curve above, ending at a higher price, lower quantity, a profit rectangle and a deadweight triangle against the competitive benchmark.
1. The rule, one letter different
The rule, one letter different
2. The markup and its measurement
The markup and its measurement
3. Profit and the triangle
Profit and the triangle
4. Do monopolies actually do this
Do monopolies actually do this
5. The monopoly choice
A monopolist faces demand P = 60 - Q/2 with marginal revenue MR = 60 - Q, and marginal cost MC = Q/3. What quantity and price does it choose?
6. The deadweight triangle
The competitive equilibrium in this market is 90 jars at 15 dollars, while the monopoly sells 45 at 37.5 with marginal cost 15. Which trades make up the monopoly's deadweight loss?
7. The Lerner index
A monopolist charges 50 dollars where its marginal cost is 20 dollars. Compute the Lerner index (P minus MC) divided by P, as a decimal rounded to two places, and write the number like 0.30.
8. Finding the monopoly point
A monopolist faces demand P = 80 - Q, so marginal revenue is MR = 80 - 2Q, and marginal cost is a constant 20 dollars. What are the profit-maximizing price and quantity?
9. The triangle between the outcomes
With demand P = 80 - Q and MC = 20, the competitive market would trade 60 units while the monopolist sells 30. What is the deadweight loss of monopoly?
10. Another Lerner index
A monopolist charges 60 dollars where its marginal cost is 30 dollars. Compute the Lerner index as a decimal, and write the number.
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