A monopolist has costs C(Q) = 5Q. It has one consumer whose inverse demand is P = 35-Q.
a. Derive the monopolist’s marginal cost and average cost. Graph the demand and marginal cost curve.
b. Derive the profit maximizing output, price, profit and consumer surplus when the firm cannot price discriminate. You may leave the expressions unsimplified.
c. Is the monopolist efficient? If not calculate the welfare lost (a.k.a., dead weight loss).
d. Given the price in part b., derive the profit-maximizing fixed fee the monopolist could charge. Explain why this is the fee.