Question

Consider a market with 190 consumers. Of these, 90 of them have individual (nverse) demands given by: PM(Q)=10-Q, while each of the other 100 has an individual (inverse) demand of PS(Q)=10-10Q. The cost function of the monopolist serving this market is 60 400. (a) Find the aggregate demand. Analyze the cost function and find what kind of returns to scale it exhibits. (b) Compute the efficient total output (ignoring break-even constraints).(c) Compute the optimal linear price (and quantity) for this monopolist.(d) Compute the consumer surplus for a consumer of each of the two types. Also, compute the deadweight loss.

Answer 1

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Step-by-step explanation:

(a) Aggregate demand can be the total sum of demand of all the people. It is proposed that a person inverse demand curve of individual amounting to 90 is PM(Q) = 10-Q and individual inverse demand curve of 100 individual is PS(Q)=10-10Q. therefore the aggregate demand curve is Q=1000-100P

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