(6 points) A monopolist with constant marginal cost of $4 faces demand QD = 20 - 2P and that the marginal revenue is MR = 10 - Q.

a) In one graph, sketch the demand, marginal revenue, and marginal cost.

b) What quantity and price will the monopolist set?

c) What is the producer surplus for the firm?

(4 points) Three roommates Tinker, Evers, and Chance share an apartment. It is really cold outside and they are considering turning up the thermostat in the apartment up by 1, 2, 3, or 4 degrees. Their individual marginal benefits from making it warmer in the apartment are as follows:

Tinker Evers Chance 1 degree $5 $4 $3 2 degrees $4 $3 $2 3 degrees $3 $2 $1 4 degrees $2 $1 $0