In New York City, it is common to see sidewalk stands selling roses. Rather than sell individual flowers, sellers prefer to sell roses by the dozen. Suppose the quantity demanded for roses (in dozens) in Brooklyn can be represented as follows: 𝑄𝐷(𝑃) = 10,000 − 10𝑃
a) Do you expect the market for roses to be closer to perfect competition or monopoly? Why? A firm serving this market faces the following short-run cost function: 𝐶(𝑞) = 𝑞 + 100
b) If the market is perfectly competitive, what will be the prevailing price in the market for a dozen roses?
c) What is the market equilibrium quantity sold (in dozens), if the market is perfectly competitive?
d) What are consumer and producer surplus under perfect competition?
e) Suppose the market is instead served by a monopoly. What is the profit-maximizing quantity (in dozens of roses) produced?
f) What is the profit-maximizing price that a monopolist would charge for a dozen roses given the demand function above?
g) What are consumer and producer surplus under monopoly?
h) What is the deadweight loss associated with monopoly?
i) Would the gains in producer surplus from switching to monopoly from perfect competition outweigh the losses in consumer surplus? Get Economics homework help today