A local video rental monopolist faces the weekly demand function: Q^D= 500 - 50P. The marginal cost of a rental is $2 and the firm has $500 in weekly fixed costs.

1. Determine the monopolist's profit-maximizing level of Q and P. How much profit does the monopolist have each week?
2. How much deadweight loss is there in this market?
3. Suppose the city government imposes a tax of $2 on all video rentals. What effect will the tax have on the price the monopolist charges? How much of the tax is paid by the monopolist and how much is paid by the consumers?
4. How would your answer to part c change if, instead of charging a tax of $2 per video rental, the city imposed a fixed fee on the business that does not depend on how much output it produces? Explain.