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Based on market research, a film production company obtains the following information about the demand and production costs of its new DVD:

Demand: P = 1,000 -10Q

Total Revenue: TR =1,000Q 10Q^2

Marginal Revenue: MR =1,000- 20Q

Marginal Cost: MC=100 10Q

where Q indicates the number of copies sold and P is the price in dollars.

a. Find the price and quantity that maximizes the company's profit.

b. Find the price and quantity that would maximize social welfare (the competitive equilibrium).

c. Calculate the deadweight loss from monopoly.

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Chika Ilonah
Chika IlonahLv10
28 Sep 2019

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Related questions

Regulation under a monopoly:

The inverse demand for a product is P(Q) = 100 - (1/2)Q. Production is associated with a marginal private cost, MCP(Q) = Q, and a constant marginal external cost, MCE = 25.

(a) Graph inverse demand, marginal revenue, marginal private cost, and marginal social cost on a single graph. Label the axes.

(b) What is the unregulated equilibrium? (Define in terms of price and quantity.)

(c) What is the socially optimal price-quantity pair?

(d) What is the deadweight loss under an unregulated monopoly in this case?

(e) What should the regulator do?

The market demand is P=100-1.5Q and marginal & average costs are constant at 10 (MC=AC=10) find the monopoly price and quantity. find the perfect competition price and quantity. calculate profit, social welfare(consumer and producer surpluses), and dead weight loss in both situations. if a duopoly exists and produces quantity Q=50, calculate the price and profit of each firm

PROFIT MAXIMIZATION

Reminders:

Q: Quantity, TC: Total Costs, VC: Variable Costs, MC: Marginal Costs, MR: Marginal Revenue, TR: Total Revenue

1. Suppose the market for DVD movies is perfectly competitive. The industry price for the movies is $24, and a typical firm has the following total cost data:

Q

TC

VC

MC

MR

TR

Net Profit

0

10

1

33

2

53

3

70

4

90

5

114

6

143

a. Calculate the TR, MR, and MC for each level of output.

b. What condition must be met for the firm to maximize profits? What is the profit maximizing level of output and price for this firm? How much profit would be made?

2. Now suppose that some firms have been able to differentiate their DVDs, and the market has become monopolistically competitive. A typical firm now has the following demand schedule and total cost data:

Q

P

TC

VC

MC

MR

TR

Net Profit

0

40

8

1

35

20

2

30

28

3

25

40

4

20

56

5

15

76

6

10

100

a. Calculate the TR, MR, and MC for each level of output.

b. What condition must be met for the firm to maximize profits? What is the profit maximizing level of output and price for this firm? How much profit would be made?

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