Use the figure below, which shows the linear demand and constant cost conditions facing a firm with a high barrier to entry, to answer the following questions:

a. The profit-maximizing price is $ __________, and the firm will produce __________units. The firm earns economic profit of $ __________.b. Suppose antitrust officials find a way to remove the entry barrier to this market, and the market becomes perfectly competitive. Assuming that demand and cost conditions remain the same, what price and quantity will result? How much consumer surplus will buyers in this market gain?c. How much dead weight loss is caused by the market power created by the high entry barrier?

Transcribed Image Text:

80 60 40 LAC = LMC D 100,000 200,000 Quantity Price and cost (dollars) 20