Suppose that a monopolist firm's demand curve is given by P = 100-2y and its marginal cost is given by MC(y) = y/2 Answer the following questions:
a) What is the profit-maximizing level of output and price for the monopolist?
b) Now suppose that this rm is in a perfectly competitive industry, still facing the same marginal cost curve. (Assume that the average cost curve of this rm always lies below its marginal cost curve.) Calculate the price and quantity that we would observe in this industry.
c) Calculate the consumer surplus under both the monopoly and the perfectly competitive industry structure. Compare your results.