Question
1) A monopolist can produce at a constant marginal cost of 5 (assume that the total cost function does not include a constant). The firm
1) A monopolist can produce at a constant marginal cost of 5 (assume that the total cost function does not include a constant). The firm faces a market demand of Q = 53 - P.
a) Calculate the profit maximizing price, output and profits for the monopolist. (Show your calculations)
b) Calculate the price and output for a perfectly competitive industry for this market demand. (Show your calculations)
c) Calculate the consumers surplus from part (b). (Show your calculations)
d) Show that this exceeds the sum of monopoly profits and the consumers surplus received in case (a). (Show your calculations)
e) What is the value of deadweight loss from monopoly? (Show your calculations)
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