1. Market demand is given by P = 500 - 4Q. The monopolist who serves the market has MR = 500 - 8Q and its MC = Q + 50. Its ATC = .5Q + 50.
a. If the monopolist could perfectly price discriminate, what would be its producer surplus?
2. In a perfectly competitive market, market demand is P = 200 - 5Q and market supply is P = Q + 8. Each identical firm has MC = 10Q and ATC = 5Q.
a. In equilibrium, how much will each firm produce?
b. Suppose that minimum average total cost is $5. How many firms will there be in long run equilibrium?
c. If this market were served instead by a monopoly with MR = 200 - 10Q, what would be the deadweight loss compared to perfect competition?
(Please give an explanation so I can understand how to answer the questions).
