Assume the market demand facing a monopolist is P(Q) = 100 Q.

The marginal revenue of the monopolist is MR(Q) = 100 2Q.

The monopolist's marginal cost, variable cost and fixed cost of production are respectively MC(Q) = 10, V C(Q) = 10Q and F C = 800.

Based on the above information, answer the following questions.

(a) On a single diagram, carefully draw and label the monopolist's demand curve, marginal cost curve and marginal revenue curve. Carefully indicate the monopolist's profit maximizing price P and quantity Q . Suppose the monopolist is producing at its profit maximising price and quantity. Carefully indicate the area representing the deadweight loss.

(b) Find the monopolist's profit maximizing price P and quantity Q . Using these two values, calculate the profits of the monopolist. Show your workings.

(c) Suppose the government wishes to intervene to maximize market efficiency by imposing marginal cost pricing rule on the monopolist. What quantity will the monopolist produce and what price will it charge? Will the monopolist exit the market in the long run? Show your workings. [Hint: Check average total cost curve.]