Consider a monopolist facing a direct demand function qd= 23-1/2 p. The firm's marginal cost is given by MC= 10-4q+q². a) Give a brief intuitive explanation of an indirect demand function. b) Find the indirect demand function from the specific direct demand function given above. c) Find the monopoly price and output.
Consider a monopolist facing a direct demand function qd= 23-1/2 p. The firm's marginal cost is given by MC= 10-4q+q². a) Give a brief intuitive explanation of an indirect demand function. b) Find the indirect demand function from the specific direct demand function given above. c) Find the monopoly price and output.
Chapter8: Monopoly
Section: Chapter Questions
Problem 7SQP
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Transcribed Image Text:Consider a monopolist facing a direct demand function qd= 23-1/2 p. The firm's
marginal cost is given by MC= 10-4q+q².
a) Give a brief intuitive explanation of an indirect demand function.
b) Find the indirect demand function from the specific direct demand function
given above.
c) Find the monopoly price and output.
d) Calculate the producer and consumer surplus. Illustrate this graphically and
discuss.
e) Calculate the competitive price and output. Compare and contrast this to the
monopoly outcome.
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