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Problem a. There are four elements that can be discussed to understand the major differences between perfect competition and monopoly; namely, price, output, profit and efficiency (productive and allocative). Explain these differences in detail. Use graph(s) to illustrate your answers.
Problem b. A monopoly firm has the following demand curve: Q = 2,000 - 25P where Q is its monthly output. Assuming its monthly short-run total cost is described by the function STC = 500 + 8Q + 0.035Q2
Answer the following questions:
i. What will be its profit-maximising price and output?
ii. How much profit will it have at the preceding output?
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