A monopolist faces a demand curve given by: P = 220 – 3Q, where P is the price of the good and Q is the quantity demanded. The m

Question

2 years ago

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A monopolist faces a demand curve given by: P = 220 – 3Q, where P is the price of the good and Q is the quantity demanded. The m

arginal cost of production is constant and is equal to $40. There are no fixed costs of production. What is the deadweight loss associated with this monopoly?

Business

1 answer:

Montano1993 [528] · Answer 1 · 2022-09-01T21:36:54+03:00

Answer:

$1350

Explanation:

To find dead weight loss we will take into consideration the price and output level of both monopoly and perfect competition.

Dead weight loss = {(P2 - P1) * (Q1-Q2)} / 2

Where, P2 and Q2 are price and quantity respectively of monopolist and P1 and Q1 are price and quantity respectively of perfect competiton.

Dead weight loss = {(130-40) * (60-30)}/2

= (90*30)/2

= $1350