2. (Market Failure of a Monopoly) Assume a monopolist faces a market demand curve = 240 1/2 and short-run total cost function = ^2.

a. Graph and label marginal revenue, demand curve, and marginal cost curves.

b. What is the profit-maximizing level of output, price, and profits? Label output and

price on your graph as (QM, PM)

c. What is the socially efficient (competitive) price and output level? Label this on

your graph as (Q*, P*)

d. Shade in consumer surplus, producer surplus, and the deadweight loss under the

monopoly. (hint: PS will be a trapezoid; rectangle plus triangle)

e. Calculate consumer surplus, producer surplus, and the deadweight loss of this

monopoly.