A monopolist faces a demand of D(P) = 4001/5P and constant marginal costs: TC(Q) = 1, 000Q.

1. The government imposes a maximum price of $1250. Discuss the welfare effects of this measure.
2. Instead of the maximum price, the government gives producers a per unit subsidy of $1,000. Discuss the welfare effects of this measure.
3. Suppose the market is perfectly competitiveand the government gives producers a per unit subsidy of $1,000. What is the welfare effect of this subsidy. Compare with answers from 3.