1. Consider the following market demand: P = 20 - 0.02Q, where P is the price in $/kilo and Q is the quantity demanded in kilos/week. The marginal cost schedule is given by MC = 2 + 0.03Q.

1. If this were a perfectly competitive market, what would be the equilibrium price and quantity? Show your work. (2)

1. If this were a monopolized market, what would be the equilibrium price and quantity? Show your work. (2)

1. What is the deadweight loss in the monopolized market? Give the number and show your work. (2)

2.Do you think Alexander College is better modeled as a perfectly competitive firm or a monopolist? That is, do you think AC has enough market power so we must take into account its ability to change its tuition if we want to analyze the college decisions? Explain why you think so (i.e., what are the reasons to think that AC has no significant market power if your answer is that we better model it as a perfectly competitive firm or the reasons to think that AC does have significant market power if your answer is that we better model it as a monopolist). (4)