The market demand is now given by Q(P) = 30000/P². There are three suppliers, each with constant marginal cost (a reasonable approximation in electricity generation) and no fixed cost for simplicity. Firm 1 has a capacity of 200 units at MC = 5. Firm 2 has a capacity of 100 units at MC = 8. Firm 3 has a capacity of 100 units at MC = 10. Now, all three firms merge and become a single firm. The newly created firm becomes a monopoly but there is no technology transfer after the merger; so, for example, if the newly created monopoly firm wants to produce 250 units, it will need to produce the last 50 units at firm 2 with a marginal cost of 8.

Question 1. What price will the monopoly firm charge, and how much electricity will be consumed?

Question 2. What will be the deadweight loss? Compute.

To help you, the graph below shows the inverse demand P(Q), the marginal revenue MR(Q), and the market supply under the assumption of price taking behavior by all three firms.