# A monopolist faces a market (inverse) demand curve P = 50 − Q . Its total…

A monopolist faces a market (inverse) demand curve P = 50 − Q .

Its total cost is C = 100 + 10Q + Q2 .

a. (1 point) What is the competitive equilibrium benchmark in

this market? What profit does the firm earn if it produces at this

point?

b. (2 points) What is the monopoly equilibrium price and

quantity? What profit does the firm earn if it produces at this

point?

c. (2 points) What is the deadweight loss at the monopoly

outcome?

d. (2 points) If we implement some form of regulation here

(don’t worry about different forms of pricing and rate structure

yet, just stick with the basic model), what would the welfare-

maximizing regulated price and quantity be? What is deadweight loss

at that point?

e. (1 point) Why is there still deadweight loss at the regulated

outcome?

f. (2 points) Draw a graph illustrating your answers (hint: feel

free to freehand-draw the AC curve, don’t spend too much effort

calculating it).