Problem
Figure 14P-2 presents the demand curve, marginal revenue, and marginal costs facing a monopolist producer.
a. What is the profit-maximizing level of output?
b. What price will the monopolist charge for the quantity in part a?
c. What are the efficiency costs (deadweight loss) of monopoly output/pricing? Provide a numerical answer and illustrate this area on the graph.
d. What is consumer surplus under monopoly output/pricing? Illustrate this area on the graph.
e. What is the loss of consumer surplus under monopoly outcomes versus efficient outcomes? Provide a numerical answer.
