Scenario 10.9:
Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows:
P = 360 - 4Q MR = 360 - 8Q MC = 4Q
-Refer to Scenario 10.9. What level of output maximizes the sum of consumer surplus and producer surplus?

Question

Quizplus · Accepted Answer

To maximize the sum of consumer and producer surplus, we need to find the output at which marginal cost equals marginal revenue. Setting MR = MC, we get 360 - 8Q = 4Q. Solving for Q, we get Q = 45. Plugging this back into the demand curve, we get P = 360 - 4(45) = 180. Therefore, the level of output that maximizes the sum of consumer and producer surplus is 45 units, and the price will be $180. Any output level other than 45 will result in either a lower total consumer and producer surplus or a loss for the firm.

Scenario 10.9: Maui Macadamia Inc. Has a Monopoly in the Macadamia Nut