The inverse demand curve for a monopolist changes from P = 200 - 0.25Q to P = 180 - 0.25Q, while the marginal cost of production remains unchanged at a constant $90. After the change in the demand curve, the price falls by _____ and the output falls by _____.

Question

Quizplus · Accepted Answer

The inverse demand curve is P = 180 - 0.25Q. To find the price, we set Q = 0 and solve for P: P = 180 - 0.25(0) = 180. To find the output, we set P = 90 and solve for Q: 90 = 180 - 0.25Q, so Q = 360. The original inverse demand curve is P = 200 - 0.25Q. To find the original price, we set Q = 0 and solve for P: P = 200 - 0.25(0) = 200. To find the original output, we set P = 90 and solve for Q: 90 = 200 - 0.25Q, so Q = 440. Therefore, the price falls by 180 - 200 = $20 and the output falls by 440 - 360 = 80 units.

The Inverse Demand Curve for a Monopolist Changes from P