Managerial Economics & Business Strategy 8th Edition by Michael Baye,Jeff Prince

Exercise 5

As the manager of a monopoly, you face potential government regulation. Your inverse demand is P = 40 - 2 Q, and your costs are C ( Q ) = 8 Q.
a. Determine the monopoly price and output.
b. Determine the socially efficient price and output.
c. What is the maximum amount your firm should be willing to spend on lobbying efforts to prevent the price from being regulated at the socially optimal level?