The demand for bread in Munchkinland is given by

Q = 300-5P

where Q: quantity, P: price. The long run cost function of each bakery is given by

C=200+5q²

a. If the bread industry is perfectly competitive, and each firm can have only one bakery, how

many bakeries would operate in the long run, and what would be P and Q?

b. Assuming that the monopolist can have any number of bakeries, what would be P and Q and

how many bakeries would there be if the industry is a monopoly? How much profit would the

monopolist make?

c. With what P and Q, and with how many bakeries, is social welfare maximized?

d. If the monopolist realized that he could separate demand into two markets characterized by the

demand curves.

Q1 = 100 - 3 P₁ and Q2 = 200 - 2 P₂

how much would he sell in each market? How much profit would the monopoly make now?