Question 1: You know that the inverse demand curve is defined by the following function: P=25-Q and costs are defined by 5*Q (so you know MC is 5 for all possible levels of Q).
a. What is the equilibrium price quantity pair if the market is perfectly competitive?
b. What is the size of consumer surplus if the market is perfectly competitive?
c. What is the size of producer surplus if the market is perfectly competitive?
d. If this was a monopolist, what will be the Use the bisection rule to define the marginal revenue curve?
e. What level should the monopolist produce at?
f. What is the monopolist price?
g. What is the implied profit?
h. What is the size of producer surplus for the monopolist?
i. What is the size of consumer surplus for the monopoly setting?
j. Compare the implications for social welfare for the perfectly competitive market with the monopoly market structure. Which leads to greater total social welfare?