Questions:
1. A monopoly faces demand given by Q = 200 - P. The marginal cost MC = $10 is constant. The marginal revenue MR = 200 - 2Q.
a. Graphically show the monopoly's equilibrium.
b. What is the equilibrium price and quantity?
c. What are the profits earned by the monopolist?
d. Suppose the government forces the monopolist to behave like a Competitive firm.
What will be equilibrium price and quantity now? What will be the firm's profits?
2. Assume the Market Demand is given by Q = 300-2P, and MC=AC=30. Compute the price, quantity, consumer surplus, profits, and DWL under the following market structures:
a) Perfect competition
b) Monopoly
c) Perfectly price discriminating monopoly