ECON 1101 The market demand curve for corn is Q=300-P. The supply of corn is provided by a monopoly whose MC at quantity Q is given by the formula ½ Q
The market demand curve for corn is Q=300-P. The supply of corn is provided by a monopoly whose MC at quantity Q is given by the formula ½ Q
a.(1 point) Draw the MC curve of the monopoly (i.e., quantity on horizontal axis and $ value of MC on the vertical axis).
b.(1 point) Draw a diagram of the monopoly's profit maximizing price and quantity
c.(1 point) If instead of a monopoly corn was supplied in a competitive market and the market supply curve is the same as the given MC curve of the monopoly show what would be the competitive equilibrium in the same diagram.
d.(2 points) In your diagram show what is happening to consumer, producer and total surplus to society when the monopoly solution is compared with the competitive equilibrium.
e.(2 points) Calculate the numerical values of the price charged and quantity produced when the supply is controlled by a monopoly. You may take the formula for the MR curve as given by MR at output Q = 300 -2Q.
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Solution: ECON 1101 The market demand curve for corn is Q=300-P. The supply of corn is provided by a monopoly whose MC at quantity Q is given by the formula ½ Q