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##### Consider a monopolist, who faces the demand function Q

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**Question**

Consider a monopolist, who faces the demand function Q(p)=1-p. The monopolists cost function is C(Q)= 1/128 + Q^2/2.;a) Is the demand curve elastic/inelastic/ unit elasticity?;b) Can p=1/4 be the monopolists optimal price. Explain the intuition behind your answer without solving the monopolists problem explicitly.;c) Find the marginal revenue and the marginal cost functions and show the graphically.;d)Find the monopolists price output, profit and the price-cost margin.;e) What are the consumer surplus, producer surplus and social welfare in the market;f) If the monopolists costs are given by C(Q)= F+Q/2, then what is the maximum value of the fixed costs F that keeps the monopolist in the market in the long run?

Paper#28591 | Written in 18-Jul-2015

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