The total cost (TC) of a monopolistic firm is a linear function of output (q), expressed as TC=20q. Market demand for the firm is p=100-2q.   a. Determine the monopolistic firm's profit-maximizing output and price.   b. Calculate the Lerner Index of the firm.   c. Determine the Pareto optimal level of output and price, where the sum of producer and the consumer surplus is maximal.

Exploring Economics
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ISBN:9781544336329
Author:Robert L. Sexton
Publisher:Robert L. Sexton
Chapter14: Monopolistic Competition And Product Differentiation
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The total cost (TC) of a monopolistic firm is a linear function of output (q), expressed as TC=20q. Market demand for the firm is p=100-2q.

 

a. Determine the monopolistic firm's profit-maximizing output and price.

 

b. Calculate the Lerner Index of the firm.

 

c. Determine the Pareto optimal level of output and price, where the sum of producer and the consumer surplus is maximal.

 

d. Calculate the consumer surplus, producer surplus, and deadweight loss (DWL) in the monopoly case.

 

e. Calculate the loss of consumer surplus and gain of producer surplus due to the monopoly.

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