Problem
Suppose that the Big Toy company is the sole producer of a new trendy toy. Demand for this new toy is given by q=37-0.8p, where q is the number of units of the toy that consumers are willing to buy at price p. The total cost for the Big Toy company of producing q units of the new toy is 0.5q2 179.
A. How many units of the new toy will the Big Toy company produce? (Use up to two decimal points in all of your answers below.
B. At what price will the Big Toy company sell the toy?
C. How much profit does the Big Toy company make?
D. If this were a competitive market, how many units of the toy would be sold?
E. If this were a competitive market, what would be the price of the toy?
F. Briefly explain why the monopolist chooses to produce a different number of units than a firm in a competitive market would.
G. Would it be a good idea for the government to regulate the market for this new toy? Explain why or why not. If you think it is a good idea for the government to regulate this market, explain what type of regulation they should implement and how it would affect the outcomes in this market.