Answer to Question #107450 in Microeconomics for Celine Cao

Question #107450
Joyce is operating a sushi restaurant in a small town. She is a monopolist. Her total cost function is C = 50Q − Q2and the demand function is P = 80 − 4Q. Provide a fully labeled diagram and simple calculations to illustrate and quantify how price, quantities, profits and the monopoly efficiency loss would be affected if the firm could implement a Two-Part Tariff.
1
Expert's answer
2020-04-02T09:37:56-0400

Solution:


"MC=C{\\prime}=50-2Q"

"MC=p"


"50-2Q=80-4Q"

"2Q=30"

"Q=15; p=20"

Then "Pr=TR-TC"

"TR=p \\times Q=300"

"TC=50Q-Q^2=50\\times 15 - 15^2=750-225=525"


"Pr=300-525=-225"



Now the company is operating at a loss. If the firm could implement a Two-Part Tarif:

p=40; Q=10.


"TR=40 \\times10=400"

"TC=50\\times10 - 10^2=400"

Get the breakeven point.


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