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Question You have been granted a monopoly in the avocado market. The market demand for avocados is Q = 2000 – 2P. Your cost structure is such that your total costs are TC = 1000+ 400Q. (limit: whatever needed)   What is your profit maximizing price and quantity? Explain this in words and show it graphically. What are the profit, producer surplus and consumer surplus? The government is thinking about breaking your monopoly into ten identical firms and giving ownership to 10 random people. Correspondingly, each firm would have a fixed cost of $1000 and a marginal production cost of $400 per unit. In this perfectly competitive environment, what would be the equilibrium price and quantity? Explain this in words and show it graphically. What are the profit per firm, producer surplus and consumer surplus that correspond to your answer to part d)? How much would you be willing to pay to keep the government from taking your monopoly away? Explain. check_circle Expert Answer Step 1 In case of market with monopoly, the Q*(profit max qty.) is found by: MRTRMRMC====MCwhere,P*QdTRdQdTCdQ$\begin{array}{rcl}\mathrm{MR}& =& \mathrm{MC}\\ & & \mathrm{where},\\ \mathrm{TR}& =& \mathrm{P}*\mathrm{Q}\\ \mathrm{MR}& =& \frac{\mathrm{dTR}}{\mathrm{dQ}}\\ \mathrm{MC}& =& \frac{\mathrm{dTC}}{\mathrm{dQ}}\end{array}$ Step 2 1. Q TRMRMC1000−QQ*P*========== 2000 – 2PP*Q2000−Q2*Q12(2000Q−Q2)12(2000−2Q)1000−Q400equating MR and MC400600700$\begin{array}{rcl}\mathrm{Q} & =& 2000 – 2\mathrm{P}\\ \mathrm{TR}& =& \mathrm{P}*\mathrm{Q}\\ & =& \frac{2000-\mathrm{Q}}{2}*\mathrm{Q}\\ & =& \frac{1}{2}(2000\mathrm{Q}-{\mathrm{Q}}^2)\\ \mathrm{MR}& =& \frac{1}{2}(2000-2\mathrm{Q})\\ & =& 1000-\mathrm{Q}\\ \mathrm{MC}& =& 400\\ & & \mathrm{equating} \mathrm{MR} \mathrm{and} \mathrm{MC}\\ 1000-\mathrm{Q}& =& 400\\ \mathrm{Q}*& =& 600\\ \mathrm{P}*& =& 700\end{array}$ x-axis shows Q(qty) and y axis shows MR and MC. The blue line is MC and green is MR. 2. profit====TR−TC(2000−Q2)−(1000+400Q)420000−2410001,79,000$\begin{array}{rcl}\mathrm{profit}& =& \mathrm{TR}-\mathrm{TC}\\ & =& \left(\frac{2000-\mathrm{Q}}{2}\right)-(1000+400\mathrm{Q})\\ & =& 420000-241000\\ & =& 1,79,000\\ & & \end{array}$ the dotted area is the CS(consumer surplus), which is 42,250. $\begin{array}{rcl}\mathrm{area} \mathrm{of} \mathrm{triangle} & =& \frac{1}{2}*\mathrm{base}*\mathrm{height}\\ & =& \frac{1}{2}*650*1300\\ & =& 42250\end{array}$     谢谢亲的回惠顾，期待您的下次光临！ 添加客服微信:bbwxnly，购买沟通交流so easy 欢迎咨询以下我们的一站式服务内容：查题｜解锁｜帐号包月 Coursehero｜Scribd｜Studymode｜Oneclass｜Chegg｜Studyblue｜Termpaperwarehouse｜SolutionInn｜Bartleby｜eNotes｜Bookrags｜SaveMyEaxms｜｜Study.com｜Studypool｜QuillBot｜and more… 谢谢亲的支持，祝您学习愉快:)