1. Draw a linear demand curve, marginal revenue curve, marginal cost curve, average total cost curve, and an average variable cost curve for a monopolistic competitor making an economic loss in the short run. Consider the following graph for a monopoly: a. What is the profit maximizing price and $5 quantity? MC b. Calculate the consumer surplus for the profit 8 :; . maximizing monopolist. E ;3' c. Suppose the government regulates the $25 monopolist to produce at the socially $2 optimal, what is the price and quantity? $1.25 d. Calculate the consumer surplus for the - socially optimal output. S0 15 25 30 50 Quantity 4. Suppose that the productivity per worker in the milk and cranberry juice industries of Southland and Northland are as follows: Output in Thousands of Litres _ Milk Cranben_'y Juice Northland 6 3 Southland | 2 __ 1 a. Which country has the absolute advantage in producing milk? In producing cranberry juice? b. Which country has the comparative advantage in producing milk? In producing cranberry juice? The table below shows the production possibilities curve for Troy and Sparta. Prior to specialization and trade, Troy is producing combination B, and Sparta is producing combination D. Tro_y's Production Possibilities Product [ A B c | o | E Carrot : 0 1 2 3 4 Olives 4 3 2 1 0 Sparta's Production Possibilities Product | A B C D Carrot | 0 | 2 4 6 8 Olives 16 12 8 _ 4 a. What is the total output of the two countries for both products before specialization and trade? b. [Ifeach country were to specialize in the product in which it has a comparative advantage, what will be the total output of the two countries for both products? c. Suppose Troy and Sparta engage in trade. Can world output of both goods increase