Economics Assignment: Monopoly Market Analysis

Running Head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the Student
Name of the University
Author note

1ECONOMICS ASSIGNMENT
Table of Contents
Answer 3....................................................................................................................................2
Answer a.................................................................................................................................2
Answer b................................................................................................................................5
Answer c.................................................................................................................................8
Reference list............................................................................................................................10

2ECONOMICS ASSIGNMENT
Answer 3
Answer a
The market demand for lifetime sales of the product is given as P = 12000 – 2Q
Total Revenue (TR) of the MedEcon is obtained as = ( P∗Q )
¿ ( 12000−2Q ) ∗Q
¿ 12000 Q−2 Q2
Marginal Revenue therefore is,
d (TR)
dQ = d(12000Q−2Q2)
dQ
¿ 12000−4 Q
The fixed cost of the business is $2,000,000
In the given scenario, there are two different marginal cost over two range of output. For first
1500 implants the marginal cost is $1000 and from 1501st implants marginal cost rise to
$2000.
Therefore,
The Total cost function for MedEcon is
TC=$ 2,000,000+ $ 1000Q1+ $ 2000 Q2
Q1 denotes implants less than equal to 1500
Q2 denotes implant greater than 1500
Optimal price and output in the monopoly market is determined where marginal revenue
equals marginal cost (Fine, 2016).

3ECONOMICS ASSIGNMENT
In output is within 1500 implants then the optimal output is determined as
MR = MC
12000 – 4Q = 1000
Or, 4Q = 11000
Or, Q = 2750
However, as per quantity restriction (implants ≤ 1500), output should be less than 1500. The
solution does not follow the restriction. Therefore, this possible output is discarded.
For units greater than 1500, the optimal output will be
MR = MC
12000 – 4Q = 2000
Or, 4Q = 10000
Or, Q = 2500
Optimal quantity for the monopolist (QM) = 2500
Optimal monopoly price
PM =12000−2Q
¿ 12000− ( 2∗2 50 0 )
¿ 12000−500 0
¿ 7 000