Let's compare the price and output decisions of a competitive firm versus a monopoly. Examine Diagram 1 below and answer the questions that follow.

a.In Diagram 1 above, suppose the industry is a competitive one. What would be the price charged and quantity exchanged? Explain how you derived your answer.

b.Now, assume Diagram 1 represents an industry that is a monopoly. What would be the prevailing price and quantity exchanged? Explain.

c.Assume Diagram 1 represents an industry that is a monopoly. What would be the profit per week? Show your calculations.

At what point (C, E, F, or G) on Diagram 1 does allocative efficiency occur? Explain.

Diagram 1 SPrice C B m 46 A F 20 MC D MR 0 600 1600 Quantity per week