Exercise The market demand for anti-depression drugs is Q% = 2400 40P (0, P > 60). Assume that the drugs is produced only by one firm whose total cost function is C(Q) = Q%/40 + 4000 (fixed costs are sunk). Find the quantity that the firm decides to supply and the price at which it sells it. Find the firm mark-up, and verify that the monopolist is choosing a quantity at which the demand is elastic. Find consumer and producer surplus and the society deadweight loss. 1 Assume now that the government wants to regulate the monopoly. Find the price under a first-best policy. Show that if FC = 17680 the first-best policy would lead to the firm exit in the long-run. Find the second-best price in this case. e R