Show all your calculations. Answers without explanations or calculations will receive a mark of zero. (This question is worth 20 marks in total.)

The cost curve for a monopolist in the coffee market is given by the following:MC=AC= 60

The market demand curve for coffee is given by the following:P= 300-3Q

a) (2 marks) Calculate the equilibrium price and quantity in the coffee market.

b) (3 marks) Calculate consumer surplus, producer surplus, and deadweight loss in the coffee market. Illustrate your answer with a graph. Label all the relevant curves, points and areas carefully.

Suppose the government passes anti-monopoly legislation, and forces the coffee market to become perfectly competitive, with the same cost for a typical firm as before for monopoly.

c) (3 marks) Find the long-run competitive equilibrium assuming the industry is constant-cost. That is, calculate the equilibrium price, total quantity produced and output of each firm if there are 10 firms in the market.

d) (3 marks) Calculate the producer surplus, consumer surplus, and deadweight loss in the coffee market. Show your answer in a graph. Label all the relevant curves, points and areas carefully.

e) (3 marks) What is the value of own point price elasticity of demand at the market equilibria under perfect competition and under monopoly? Is the demand elastic or inelastic at these two equilibria?

f) (2 marks) What per unit tax should be imposed on firms in the coffee market so that the market equilibrium (in terms of price and quantity) is the same as it is under monopoly?

g) (4 marks) Suppose the government collects the tax calculated in part (f) and returns it to the consumers as a subsidy. If market demand is unchanged, are consumers better off compared to the outcome identified under perfect competition case in part d). (Hint: you need to compare consumer surplus in part (d) with what consumers get now.) Illustrate your answer on a graph.