A monopolist has the following cost function and faces the following demand curve for its product: = 20 = 100

Find the monopolist quantity (Qm), price (Pm), and deadweight loss relative to the perfectly competitive outcome. Draw a diagram labelling the perfectly competitive outcome as A, and the monopolist outcome as B. Be sure to include the marginal cost and marginal revenue curves in your diagram.

Assume that there are two possible scenarios for the monopolist: i. The government set a price ceiling of $40/unit in which case the monopolist does not invest in developing any new technology because it is wary of future government regulation. ii. There is no government regulation, so then the monopolist invests in R & D which then changes the cost function so that MC =0. Which scenario has higher total surplus (ignore the cost of R & D for producer surplus)? Which scenario do the consumers prefer?