Section A: Welfare Implications of a Pure Monopoly, and Natural Monopoly A.1: Consider a profit-maximizing monopoly who faces a downward sloping demand curve. The firm is to charge a single price for all its consumers. The firm's demand curve is depicted in Columns 1 and 2. (1) Compute the firm's total revenue at different quantities and fill in the blanks in Column 3. (2) Compute the firm's marginal revenue and fill in the blanks in Column 4. Demand Curve Column 1 Column 2 Column 3 Column 4 Price Quantity Demanded Total Revenue Marginal Revenue $50 SO N.A $45 $45 $45 $40 W N H $80 $35 $35 $ $ $30 4 $25 5 $20 $15 $10 00 $5 SO 10 (3) Mark the marginal revenue entries in Column 4 on the diagram next page. Mark each entry at the midpoint of the two output units in question. Marginal is the change in total when we move from one unit to another unit. So, we associate the marginal value with the mid-point of the two units. For example, as shown in the table above, the marginal revenue of moving from zero unit to one unit of output is $45. So, this entry of $45 should be associated with Unit 0.5 and be marked at the point where (P, Q) = ($45, 0.5). As the second example, the marginal revenue of moving from one unit to two units of output is $35. So, this second entry of $35 should be associated with Unit 1.5 and marked at the point where (P, Q) = ($35, 1.5). The above two points have been marked on the diagram next page by yellow symbols as shown: Oprice f 55 50 45 40 35 30 25 20 $161 9 10 -20 -25 -30 -35 -40 -45 -50 -55 (4) Connect the ten dots to form a line and label it as Marginal Revenue (or MR). (5) Now, let's plot the straight line demand curve using the initial point (P, Q) = ($50, 0) and the endpoint (P, Q) = ($0, 10), taken from Columns 1 and 2. Label this line as Demand (or D) (Note: You are to connect two coordinates. No midpoint consideration is needed.) (6) From the graph, the quantity where the MR curve crosses the horizontal axis is the quantity where Demand crosses the horizontal axis