C. Monopoly (20 points) Price $40 30 20 I Marginal Cost I : Demand 10 : Marginal I . Revenue : ' I : I O 100 200 300 400 Quantity The figure above depicts the demand, marginal revenue, and marginal cost curves of a prot- maximizing natural monopolist who is expecting to be awarded an exclusive contract to provide local cable television in a certain city. 1. What are the output and price where the monopolist's prot is maximum? What is the rm's mark-up over marginal cost as a percentage of the price? 2. Ifthe average total cost is $15 per unit, what is the rm's total economic prot? 3. How much is the deadweight loss for this market? (Show solution) Why does a deadweight loss arise in a monopoly? 4. If government regulators where to ask the rm to charge a price and quantity that would be socially (or allocatively) efcient, what would these price and quantity be and why? At this output and price, what would happen to the consumer surplus, producer surplus and total surplus compared to the situation under monopoly. 5. Supposed that instead of a natural monopoly, the graph above pertains to a regular monopoly, what change(s) must be made to the graph to depict a regular monopoly