(KEY QUESTION) Bob is a magazine monopolist. His marginal cost of production (per magazine) is constant at $5. His demand information is as follows:

Price ($) QD

50 0

40 5

30 10

20 20

15 30

10 50

5 102

2.50 200

a. Calculate the total revenue for Bob at each price.

b. Calculate the (approximate) marginal revenue for Frank at each price.

c. What is Bob's profit-maximising output level and price? Compare this with the perfectly competitive equilibrium level of output and price.

d. (REAL-WORLD APPLICATION) Go to this useful graphics: www.scores.org/graphics/monopoly, and offer YOUR OWN views on the following questions: Is Google a monopoly? Should governments regulate Google? If so, how? (you can use some other online resources to form your views).

6) (KEY QUESTION, continuing from last week) A small town is served by many perfectly competing supermarkets, which have constant marginal cost. In the previous problem set, you used a diagram to show the (long-run) equilibrium price and quantity, the (non-existence of) the deadweight loss and the consumer and producer surpluses.

a. Now suppose that the supermarkets combine to form one chain. Using a new diagram, show the equilibrium price and quantity. What is the deadweight loss in this case? Indicate the consumer and producer surplus, how have they changed?

b. Assume that the newly formed supermarkets chain can perfectly price discriminate (hint: it means they can charge each consumer the maximum price he/she is willing to pay - think about our experiment in the lecture deriving the demand curve for your favourite singer's tickets).

How much will be sold and what will be the deadweight loss in this case? Discuss how policymakers approach these sorts of situations, and why.