1.An Insulin company has a marginal cost of production equal to $14. The fixed cost of buying the rights (and factories) to produce the insulin $80. The demand curve for insulin is

D(P) = 96 - 4P

a.Derive the marginal benefit function (i.e. inverse demand function) for the monopolist.

MB(Q)=

b.If the monopolist wants to sell some arbitrary quantity Q, what price will the monopolist charge as a function of Q?

p^mon(Q)=

c.Complete the following two equations for total revenue and marginal revenue

i.TR(Q) =

ii.MR(Q)

d.Solve for the monopolist's profit maximizing quantity Q^mon and price P^mon ?

e.Calculate the social surplus maximizing quantity Q^opt .

f.Draw a graph with D(P), MC(Q) MR(Q), your answers to d and e, producer surplus, consumer surplus, deadweight loss, and labelling the axes.

g.Calculate the monopolist's profits (producer surplus - cost of production)?

h.Complete the following equation for average total cost and draw it on the graph. It doesn't have to be perfect but it needs to pass through ATC(Q^opt)and it should recognise whether or not the curve passes through MC(Q). :

ATC(Q)=

i.Someone suggests breaking up the monopoly on Insulin. Why might this be a bad idea?

j.If the government imposed a price ceiling equal to marginal cost what would the monopolist do?

k.Draw a line on the graph representing a price that would increase social surplus.