Consider a Monopoly with Inverse Demand Function P = 90

question 96

Essay

Consider a monopoly with inverse demand function p = 90 - 10y and cost function c (y)= 10y.
i)Find the profit maximizing output and price, and calculate the monopolist's profits.
ii)Now, suppose the government imposes a per unit tax t = 20. Find the new price, output and profits.

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Definitions:

Limited Liability

A legal structure that limits the personal liability of the owners and shareholders of a company for the company's debts and actions.

Share Transferability

The ease with which shares of a company can be transferred or sold from one party to another.

Partnership

A legally recognized form of business where more than one individual partakes in managing and profit-sharing.

Ownership Rights

Legal rights that confer the ability to use, manage, and enjoy the benefits of an asset or property.