Q6. A monopolist in the sugar market faces a demand curve given by the equation = 60 2 and has total costs equal to = 50 + 2 2 which means = 4. Quantity is measured in millions of tons, and you may assume that units are infinitely divisible.

a) Find the optimal price and quantity for the monopolist (hint, you can derive the MR from the TR by taking the derivative of the TR! (we did something similar to this in demand and supply analysis) b) Draw a diagram and carefully label the relevant parts to support your answer to part a.

c.) Calculate the consumer surplus and represent the region representing it in your graph.

d) Calculate the producer surplus and represent the region representing it in your graph.

Q7. Now, this market becomes perfectly competitive. The production process for the good does not change. So, all firms have the same cost curves as the monopolist.

a) Find the long run equilibrium price and quantity in the competitive market.

b) How many firms are there in the long run equilibrium?

c) What is consumer and producer surplus in the competitive setting?