Monopoly Example
Let inverse demand be $p=24-Q$ and the monopolist's cost function be $c(Q)=\frac{1}{2}Q^2$. Set up the monopolist's profit maximization problem and solve for the optimal $Q$ and $p$.
Try this problem for yourself and then watch this video walking through the solution.
Monopoly Welfare Example
As in the last example, let inverse demand be $p=24-Q$ and the monopolist's cost function be $c(Q)=\frac{1}{2}Q^2$. We found in that example that the profit-maximizing quantity $Q^m=8$ and the profit-maximizing price $p^m=16$. What is the consumer surplus, producer surplus, and deadweight loss in this example? Find actual numbers!
Try this problem for yourself and then watch this video walking through the solution.
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