Re: monopoly doubt

Posted by Homer Simpson on Apr 09, 2014; 2:40pm
URL: http://discussion-forum.276.s1.nabble.com/monopoly-doubt-tp7586454p7586456.html

well, here's my guess. please correct me if i am wrong :)

at MR=MC, i get y=30 and p=90

The only way i can maximize total surplus is by eliminating the whole dead-weight loss incurred. That is possible when i produce the highest quantity, given cost constraint, that is at P = MC

therefore, y = 40 p=80

Any price below this, the monopolist will have losses and above this, dead-weight loss is incurred. Therefore, p=80 is the highest possible price to maximize total surplus