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A Firm with Market Power Faces the Demand Function Q

question 135

Essay

A firm with market power faces the demand function q = 1,000 - P. The firm's total cost function is TC(q) = 5q + q2 + 500. Use calculus for the following:
a. If the firm behaves as a single-price monopoly, what are the firm's optimal price and output level?
b. Demonstrate that the single-price monopolist's profit-maximizing choice of price and output also maximize producer surplus.
c. Identify the output level that would maximize total surplus.
d. Identify the output level that a perfect-price discriminating monopolist would produce.


Definitions:

Tactical Planning

Short-term, detailed planning that supports strategic goals by focusing on day-to-day operations and resources.

Operational Planning

The process of creating specific procedures and actions to achieve tactical goals and objectives within a short time frame.

Competitive Differentiation

Unique combination of organizational abilities, products, and approaches that sets a company apart from competitors in the minds of customers.

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