The Market Demand for Peanuts Is Given by P =

Essay

The market demand for peanuts is given by p = 50 - 0.5y. Squirell Inc. is the only supplier of peanuts. Its total cost function is given by TC(y)= 10y. Calculate:
i)the profit maximizing level of output, the profit maximizing price, the consumers surplus, the monopoly profits, the burden of monopoly (deadweight
loss)
ii)Squirell Inc. loses a legal battle and as a result has to pay licensing fee of $700 per
year to Jiffy Ltd. Its total costs therefore increase to TC = 10y + 700. With this new cost function, once again calculate: the profit maximizing level of output, the profit maximizing price, the consumers surplus, the monopoly profits, the deadweight loss.
iii)Are your answers the same as in part (a)or different? Explain why.