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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?

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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
Similar Posting

Monopolist Profit Maximization After Tax and with Price Ceiling

Se the attached file.

Consider a monopolist facing a market demand curve given by q = 186- p(q). The monopolist's fixed costs and variable costs are equal to Cf = 2400 and C(q) = q2 /10 +10q, respectively ........(in the latter equation its actually q squared over ten plus ten q)

Calculate:

a) the monopolist's price-quantity combination that maximizes profits and the level of profits obtained;
b) the monopolist's price-quantity combination that maximizes profits in case a fixed tax T = 1000 is introduced and the level of profits obtained;
c) the monopolist's price-quantity combination that maximizes profits in case a tax for each unit of product sold tq = 11 is introduced, the amount paid in taxes and the level of profits obtained after taxes;
d) the monopolist's price-quantity combination that maximizes profits in case a tax of the tπ = 50% on the profit is introduced; the amount paid in taxes and the level of profits obtained after taxes;
e) the monopolist's quantity and profits in case the government fixes a p = 90.

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