Problem 1 — Smartphone Monopoly (Ch 15)
A market for smartphones has a single firm. Market demand is Qd = 60 − P. The firm’s total cost, marginal cost, and marginal revenue are:
TC = 60 + 0.5Q² · MC = Q · MR = 60 − 2Q
Problem 1a — Short Answer
1a. Find the profit-maximizing price and quantity for this monopolist. Calculate the monopolist’s profit.
Problem 1b — Short Answer
1b. Suppose the firm behaves as if this were a perfectly competitive market (produce where P = MC). Determine the quantity, price, and the firm’s profit.
Problem 2 — Drug Patent Monopoly (Ch 15)
A new prescription drug is protected by a patent, so the market is a monopoly. P = 130 − 2Q · MC = 10 + Q · MR = 130 − 4Q
Problem 2a — Short Answer
2a. What is the socially optimal level of production? Give Q and P where demand equals marginal cost.
Problem 2b — Short Answer
2b. What is the monopolist’s ideal quantity of production? What price does he charge?
Problem 2c — Short Answer
2c. At the monopoly outcome from (b), what are the consumer surplus, producer surplus, and deadweight loss?
Problem 2d — Short Answer
2d. Given total cost TC = 15 + 10Q + Q², what is the monopolist’s ATC at Q = 24? What’s the monopolist’s profit?