Question 1: (10 Marks): Consider a monopolist with the demand function q=25-p with a constant marginal cost of

$5.

a) Find the marginal revenue of the monopolist. Which is bigger, the price or the MR of the monopolist?

Why? (2 Marks)

b) Find the output and the price charged by the monopolist. (1 Mark)

c) Find the total profit earned by the firm. (1 Mark)

d) Find the Consumer Surplus, Producer Surplus and Dead Weight Loss as compared to the optimal level. (2

Marks)

e) Now suppose the monopolist indulges in First Degree Price Discrimination. Find the Consumer Surplus,

Producer Surplus and Deadweight loss. Also find the total profit earned by the firm. (3 Marks)

f) Does a monopolist earn more profits under single price (part c) or as a first degree price discriminating

firm (part e). ( 1 Marks)