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# fixed costs of the monopolist

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2) A monopolist faces the following demand function for its product:

Q = 45 - 5P

The fixed costs of the monopolist are \$12 and the monopolist incurs variable costs of \$5.00 per unit.

a) What is the profit-maximizing level of price and quantity for this monopolist? What will profits be at this price and output level?
b) If the government imposes a franchise tax on the firm of \$10, what will be the profit-maximizing level of price, output, and profits?
c) If the government imposes an excise tax of 50 cents per unit of output sold, what is the impact on the profit-maximizing level of price, outputs and profits?
d) If the government imposes a ceiling of \$6 on the price of the firm's product, what output will the firm produce and what will be total profits?

https://brainmass.com/economics/cost-benefit-analysis/fixed-costs-of-the-monopolist-221198

#### Solution Preview

a)
MC=constant Variable cost=\$5.00
For MR, we have TR = P*Q=(45-Q)/5*Q
MR=dTR/dQ=9-0.4Q
Equating the two we get 9-0.4Q=5
Solving we get ...

#### Solution Summary

The fixed costs of the monopolist are examined.

\$2.19