1. A single firm with constant average and marginal costs of $8 monopolizes a market with demand Q = 100 2p,

(i) How large is the deadweight loss from monopoly?

(ii) How large is the additional social loss if, in order to obtain the monopoly, the firm spent an amount equal to half of its current profits? Draw the situation in a graph.

2. A market with demand Q = 16p -2 is supplied by a monopoly with costs C(Q) = 6 + Q 2 /8.

(i) Calculate the equilibrium price, output and monopoly profits. Draw it in a graph.

(ii) What would be the firm's strategy if the market were supplied competitively by firms, and each individual firm had the same costs?