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Step-by-step FIRST STEP | ALL STEPS | ANSWER ONLY

Step 1 of 4
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a) Market equilibrium has QD = QS

This implies

15 − Q = 3 + Q

2Q = 12

Q = 6

P = 15 − 6 = 9

Price is $9
Quantity is 6 units
CS = 0.5*(15 - 9)*6 = $18
PS = 0.5*(9-3)*6 = $18

Explanation

Please refer to solution in this step.

Step 2 of 4
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b) Demand is P = 15 - Q
Revenue is R = 15Q - Q^2
Marginal revenue is R'(Q)
MR = 15 - 2Q
Hence, marginal revenue is 15 - 2Q
Explanation
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Please refer to solution in this step.

Step 3 of 4
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c) Use MR = MC

15 − 2Q = 3 + Q

12 = 3Q

Q = 4

P = 11

Price is 11
Quantity is 4
CS = 0.5*(15-11)*4 = $8
PS = 0.5*(11 - 3 + 11 - 7)*4 = $24

Explanation

Please refer to solution in this step.

Step 4 of 4
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d) DWL is the efficiency loss due to monopoly

DWL = 0.5*(monopoly price - MC)*(Qcompetitive - Qmonopoly)
= 0.5*(11-7)*(6-4)
= $4
This is shown in the graph below

Explanation

Please refer to solution in this step.

Answer
a) P = 9, Q = 6, CS = PS = 18
b) MR = 15 - 2Q
c) P = 11, Q = 4, CS = 8, PS = 24
d) DWL = 4
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