Consider a monopolist 'AdSpace' with respect to selling advertising space in a particular internet market.

Its demand curve is given by: D = 120 2 p (or inverse demand curve p = 60 0.5 q) and marginal cost

is constant and equal to MC = 40 = ATC (average total cost).

a) If 'AdSpace' acts as a simple monopolist charging its customers one price, draw an appropriate

diagram to show the company's equilibrium. On your diagram, indicate the profit-maximising level of

output and the price charged. Show all calculations that are required to find the various points and

indicate them on the diagram.

[14]

b) Calculate the consumer and producer surplus as well as any deadweight loss. Indicate these areas

using the same diagram from a).

[10]

c) What is the company's profit in equilibrium?