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1. Suppose that the inverse demand curve facing a monopoly is given by: P = 500 - 10Q. The monopoly production costs are given by:
1. Suppose that the inverse demand curve facing a monopoly is given by: P = 500 - 10Q. The monopoly production costs are given by: C(Q) = 10Q2 + 100Q.
a. Find perfectly competitive (PC) equilibrium price and quantity.
b. Find monopoly equilibrium price and quantity.
c. Compare the perfectly competitive solution with the monopoly solution
d. Derive the Lerner Index
e. Derive the consumer surplus (CS) and producer surplus (PS). Also derive the deadweight loss.
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