Suppose there are 100 consumers in a small town, each with an identical demand curve, given by:

q = 10

– 2p where q is the amount an individual buys and p is the price they pay.

Suppose that a monopoly firm facing this market has a total cost function given by TC = 2Q, where Q is the total output of the firm. Assume that the firm knows the equation of the identical demand curves, so that it is able to price the good according to a two-part tariff scheme.

(a) Determine the equation of the market demand curve.

(b) Determine the per-unit price that the firm will charge.

(c) Determine the total consumers’ surplus and, hence, the fixed fee each consumer pays the firm for the right to purchase the good.

(d) Calculate the firm’s total revenue, total cost and profit.

(e) Is it possible for the firm to get any more revenue from this market?

Explain.