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1) ( 30 points) Comparing Perfect Competition and Monopoly The supply of chocolate in kilos is Q5=25+5P The demand of chocolate in kilos is given
1) ( 30 points) Comparing Perfect Competition and Monopoly The supply of chocolate in kilos is Q5=25+5P The demand of chocolate in kilos is given by Q=1005P We will now assume that the chocolate market is taken over by a monopolist. a) (3 points) Calculate the marginal revenue function for this marker (Using derivatives may heip). b) (5 points) Find the monopolistic equilibrium price and quantity for a single price monopolist. c) (5 points) Estimate consumer surplus. Compare the consumer surplus with that of the competitive equilibrium. Explain why they are different. d) (5 points) Estimate producer surplus. Compare the producer surplus with that of the competitive equilibrium. Explain why they are different. e) (5 points) Calculate the deadweight loss from the monopoly. What causes the deadweight loss? f) (7 points) Suppose now that the monopolist engages in perfect price discrimination (this is called first degree discrimination). What is the equilibrium price and quantity of chocolate of the perfectly price discriminating monopolist? What is the amount of consumer surplus? What is the amount of producer surplus? What is the amount of the deadweight loss? (Answer to these questions conceptually as in most cases a concrete figure cannot be determined)
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