Suppose that the market demand is Q = 100 - P First, consider a competitive industry where MC = AC = 20 for each firm in this industry
(a) What is the equilibrium quantity Qc in the market? What is the equilibrium price Pc?
(b) What is the consumer surplus, producer surplus and total surplus? Shade or indicate the relevant areas in a figure of a perfectly competitive industry (for the equilibrium quantity in the industry assume that there are 100 firms). Call this figure- Fig.1
Now, consider the same demand curve faced by a monopolist, whose costs are MC = AC = 20
(c) Find the monopolistic quantity Qm and price Pm. Show these points on a figure (call it Fig.2).
(d) Calculate the monopolist's profit.
(e) Calculate the consumer surplus, producer surplus and total surplus in this market and compare it with the perfectly competitive case. Indicate these on Fig.2