Answer all question a b and c. Thanks

Question 2 [word limit: 750] Consider a monopoly that faces a liner demand function equal to , where is the quantity demanded by the market at price . The monopolist incurs constant marginal costs of production equal to , . a. Derive and describe the quantity and price that the monopolist would choose to maximise prots. Does the monopolist's choice generate a deadweight loss? Provide a graphical representation of this market equilibrium. [10 marks] b. Suppose now that the government imposes a price ceiling equal to . What is the quantity sold by the monopolist after the introduction of the price ceiling? Is the price ceiling benecial to the welfare of the market? Support your answer with economic intuition and a diagram. [15 marks] c. Suppose that, instead of the price ceiling, the government is considering to provide a subsidy to induce the monopolist to sell the same level of quantity that you have identied under the price ceiling in part b. What is the level of the subsidy that ensures that the monopolist sells the same quantity when a price ceiling is imposed? Compared to the case with the price ceiling you have considered in part b, how does welfare, consumer surplus and producer surplus change? Which policy should be preferred by the government? Support you answers with a diagram and provide economic intuition. [25 marks]