a. Put the demand and supply curves together (at the original productivity and wages). Even though she is the only cheesecake maker, Helen acts as if she is in a perfectly competitive market. How many cheesecakes will she sell? At what price?
b. Helen gets smart and realizes that as the only cheesecake produceraround, so she can act as a monopolist. Does this mean that she can charge any price she likes?Why not? Graph the marginal revenue she gets for each additional sale as the change in total revenue (price times sales). As a monopolist, how many cheesecakes will she sell? At what price?
c. Calculate the consumer surplus for perfect competition and for monopoly. Calculate Helen's profits for perfect competition and for monopoly? Which situation is better for consumers, which is better for Helen, and which is better for society as a whole?
d. Helen's landlady raises her rent to $50. What happens to prices and quantities under perfect competition? What happens to prices and quantities under monopoly?