Monopoly Market
The demand for good X in a town is Q = 10 − P , where P is the price of good X per pound and Q is the quantity demanded in pounds. The marginal cost of producing the good is $2 per pound. There is no fixed cost of producing the good. There is only one firm, Abe, who can produce the good. Abe cannot price discriminate against any consumer.
1. What are the monopoly price and quantity?
2. What is the price elasticity of demand at the monopoly price?
3. How much are the consumer surplus, the producer surplus, and the aggregate surplus?