Answer
a) 700 Ectenian dollars is the cost of each of 30 copies, and the profit is 20,400 Ectenian dollars.
b)The price (and marginal cost) is 550 Ectenian dollars, and the quantity is 45 copies (to maximize total societal welfare).
c) 2,250 Ectenian dollars is the deadweight loss
d)
i)
ii)
iii)
iv)
Work Step by Step
a) Please see the first table. The monopolist will produce until the marginal revenue and the marginal cost are the same. This happens at a quantity of 30, and the marginal revenue and the marginal cost are 400 Ectenian dollars.
b) For society to benefit the most, the price must equal the marginal cost.
$P=MC$
$1000-10*Q=100+10*Q$
$900-10*Q=10*Q$
$900=20*Q$
$900/20=20*Q/20$
$Q=45$
$1000-10*Q$
$1000-10*45$
$1000-450$
$550$
The price (and marginal cost) is 550 Ectenian dollars, and the quantity is 45 copies.
c) DWL = $1/2$ * difference in quantities * (monopolist's price - monopolist's marginal cost at the monopolist's price)
DWL = $1/2* (45-30)*(700-400)$
DWL = $1/2 * 15*300$
DWL = $15*150$
DWL = 2250
d) Please see the second table.
i) The profit is maximized at a quantity of 45 copies (and a price of 550 Ectenian dollars). The flat fee is an overall marginal cost (but not a marginal cost on each additional unit).
ii) The profit is maximized at a quantity of 45 copies (and a price of 550 Ectenian dollars).
iii) The profit is maximized at a quantity of 40 copies (and a price of 600 Ectenian dollars). (The flat fee per unit is an additional cost of 150 Ectenian dollars.)
iv) The profit is maximized at a quantity of 40 copies (and a price of 600 Ectenian dollars).
