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Suppose a good is provided by a monopoly firm facing a demand given by p(y)=850-2y the firm has a cost of production given by c(y)=50y.
a. Find the firm's profit maximizing price and quantity. How much profit does the firm earn?
b. Determine the consumer and producer surplus in the market at the monopoly price and quantity.
c. Is the outcome from a monopoly efficient? If not, find (geometrically and analytically) the amount of deadweight loss.
d. What is the price elasticity of demand at the monopoly price and output?
e. Suppose the government decides to regulate the price of the monopoly. To do so, they set a price ceiling. What price ceiling would lead to the efficient output in the market?
f. How much profit would the monopolist make with the price ceiling?
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