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1. Suppose that a monopolist has a marginal cost of $4, and a fixed cost of $48. Suppose also that the demand curve is given by Q = 12 − (P/2).
(1 point) What is the marginal revenue of the monopolist as a function of Q?
(1 point) What is the profit-maximizing price and quantity for the monopolist?
(1 point) What is the efficient price?
(1 point) What is the deadweight loss from the monopolist’s maximizing profits?
(1 point) What are the monopolist’s profits at the profit-maximizing price?
2. SpaceX, the only company that produces commercially available space flights to Mars (a monopolist), faces the market demand Q = (40 − P)/3. The cost of Q flights to Mars is given by C(Q) =. Assume that SpaceX can only charge a uniform price to all buyers (no price discrimination).
(1 point) Find the marginal revenue and the marginal cost as a function of Q. Draw them along with the demand curve.
(1 point) Find the profit-maximizing price and quantity. What is the marginal cost at the profit-maximizing quantity?
(1 point) How much profits does the monopolist make?
(1 point) Calculate the producer surplus, consumer surplus and total surplus in the market. Illustrate them in a graph.
(1 point) What is the price elasticity of demand at the equilibrium point? What is the markup of the firm, defined by (P − MC)/P (this is known as the Lerner index)?
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