# What is the profit-maximizing price-quantity combination?

The annual demand curve for the perfectly competitive milk market is P=9-0.01Q. This market is in lo Show more The annual demand curve for the perfectly competitive milk market is P=9-0.01Q. This market is in long run equilibrium. The price of milk is \$2.00 and each of the producers operate at minimum long run average cost (LAC). The LAC function for each individual identical farm can be represented by the equation where q is millions of gallons/year. LAC=3.00-q+0.25q 2 A. Assume that a new technology causes the LAC function for dairy farming to change to: LAC=2.7-1.2q+0.3q 2 B. In the new long run equilibrium how will the expenditure on milk change? C. Ignore the technology change and demand function change stated above. Assume that a monopolist buys all of the dairy farms. The monopolist has LAC=LMC which coincides with the long run supply curve (LS=\$2) under perfect competition. What is the profit-maximizing price-quantity combination? D. What is the dollar value of the dead weight loss from monopoly? Show less