Aqueus is a classic monopolist earning positive economic profits.

(a) Draw a graph of Aqueus, labeling the profit-maximizing price P_M, the profit-maximizing quantity Q_M, and the allocatively efficient quantity Q_SO. Shade the area of deadweight loss.

(b) If Aqueus is earning economic profits, why would other firms not enter the market? Explain.

(c) The government sets an effective price ceiling. On your graph from part (a), label this price P_R and the new output quantity Q_R.

(d) After the change in part (c), Aqueus's total revenue is $40 million. If the output quantity is now 5 million units, what must be the value of P_R?

(e) If ATC at Q_R is $5, what is the economic profit or loss with the government intervention?

(f) How would the government action in part (c) affect the deadweight loss in Aqueus's market?

(g) Why might the government prefer to use antitrust policy to regulate Aqueus in the long run? Explain.

(h) Gaiana is a small firm that sells a complementary good to Aqueus'sproduct in a perfectly competitive market. Assuming Gaianawas in long-run equilibrium, illustrate the short-run effect of the government intervention from part (e) on Gaianasupply and demand in a separate graph. If Gaianaearns any economic profit or loss, shade it.

(i) Assume that Gaiana operates in a constant-cost industry.What would happen to Gaiana's firm supply and demand in the long run? Explain.