Suppose that the demand curve is P = 50 - Q and the cost function is C = 10q + f .
(a) For f equals 1, 10, and 100, find:
(i) The total surplus if there is a single supplier required to meet demand at price equals average cost.
(ii) The total surplus if the unregulated market structure is the Cournot free-entry equilibrium.
(iii) The total surplus if there is an unregulated monopolist.
(b) For each of the three values for f (i) compute the relative welfare loss of outcomes (ii) and
(iii) by taking the ratio of their total surplus relative to the total surplus under (i).
(c) What do your results in (b) suggest about the relative desirability of regulation vs. competition?