1) market with demand Q = 16p^-2 issupplied by a monopoly with costs

C(Q) = 6 +Q²/8.

Calculate the following for this monopoly firm:

(i)Output.

(ii)Price

(iii)Profit

2) If monopolies are always bad, explain why does the government award firms with

monopolies such as for public utilities and patents.

3) Explain how can a profit-maximizing dominant firm operate as a monopoly in a

market with free and instantaneous entry?

4) An industry consists of eleven identical firms with each firm's cost given as

c(q) = 4q + q². Market demand for the product is Q = 100 - p.

(a) Based in the information above, calculate the following for each firm if all eleven firms participate in a cartel;

1.Price

2.Output

3.Profit

(Hint: The firms jointly produce the output that a monopoly would produce if it

had the same costs as the eleven firms combined. i.e you need firstto find the

monopoly's costs and monopoly output)

(b) Ifsingle a firm cheated, what would its output and profits be, assuming the other firms maintain the cartel price?

(5) Assume that the manufacturing of sport caps is a perfectly competitive

industry. The market demand for sports caps is described by a linear demand

function :

Qd = 6000 - 50P; P = price of a sport cap.

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There are fifty manufacturers ofsport caps. Each manufacturer has the same

production costs given as TC(q) = 100 +q² + 10q ; q = quantity of sport cap

(i)Show that a firm in this industry maximizes profit by producing

q = (P -10) / 2

(ii)Derive the industry supply curve (Qs).

(iii)Find the market price and aggregate quantity traded in equilibrium.

(iv)How muchdoes each firm produce?

(v)Show that each firm earns zero profit in equilibrium.

(vi)Calculate the competitive industry's producer and consumer surplus.

(vii)What will be the sum of consumer and producer surplus