I have an exam this thursday and was wondering if anyone can help me on the following question.
Your help is greatly appreciated.
Firm A has a monopoly in the local market. The demand is:
= 100- 2P --> P = 50- 1/2Q
The resulting marginal revenue function is MR(Q)= 50-Q
The firm's marginal cost of production is MC(Q)= 5+1/2Q
a) Calculate the firm's profit maximizing output.
b) What are the social costs of monopoly power? Calculate the social cost
of the firm's monopoly power.