2. (35 points) The Gables Hotel and Resort in the town of Summerside, Prince Edward Island (a quaint little town with access to the gulf of St. Lawrence and the Northumberland Straight), is the only hotel serving Summerside. If the Gables faces a demand curve of D(p) = 24 - 2p and cost function given by c()) = y', then a) What is the profit maximizing level of output and price? (5 pts) b) Calculate the monopolists profit. (5 pts) c) At the optimal output level and price, what is the elasticity of demand ((y))? Show that the monopolist would never operate on the elastic portion of the demand curve. Explain fully. (5 pts) d) Relative to the competitive solution, a monopolist will raise price and lower quantity offered. Calculate the monopoly gain, and deadweight of monopoly. On a clearly labelled graph, indicate these graphically compared to the competitive solution. (5 pts) e) If the Gables is regulated by the government of PEI such that price is set equal to average cost, what price and quantity will be optimal? What is the monopoly profit under this regulatory scheme? Note, this is an example of average cost pricing. (5 pts) f) Suppose instead, the Gables is regulated to marginal cost pricing. What would be the output and price under this regulatory situation? What is the monopoly profit under this regulatory scheme? (5 pts) g) Do you believe this is a natural monopoly? Explain. (5 pts)