Monopoly and equilibrium
a. Helen gets smart and realizes that she is the only pie shop approximately. Compute the marginal revenue she gets for each additional sale as the change in total revenue (price times sales). Graph this and show the new quantity of sales and the new price.
b. Draw the area of consumer surplus on your graph. Draw the area of producer surplus.
c. Calculate consumer surplus as the sum of the difference between the price and the marginal utility for each pie. Calculate producer surplus as the sum of the difference between price and marginal cost for each pie.
d. Compare the sum of consumer and producer surplus for the monopoly with the results for perfect competition. Which is better for consumers? Which is better for producers? Which is better for society?