A monopolist operates with the following data on cost and demand. It has a total fixed cost of
$1,400 and a total variable cost of Q2, where Q is the number of units of output it produces. The
firm’s demand curve is P=120 -2Q.
a. What is the firm’s profit if it operates in a profit maximising manner?
b. What is the long run price under monopoly?
c. What if the market was purely competitive, what would the price in the LR be? What
would the quantity be?
d. Does the monopolist overproduce, or under-produce compared to the benchmark of
pure competition?