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Suppose that a monopolist's market demand is given by P = 100 - 2Q and that marginal cost is given by MC = Q/2.
a) Calculate the profit-maximizing monopoly price and quantity.
b) Calculate the price and quantity that arise under perfect competition with a supply curve P = Q/2.
c) Compare consumer and producer surplus under monopoly versus marginal cost pricing. What is the deadweight loss due to monopoly?
d) Suppose market demand is given by P = 180 - 4Q. What is the deadweight loss due to monopoly now? Explain why this deadweight loss differs from that in part (c)
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Be sure to provide support for your answer, including at least one example of how the principle is currently reflected in U.S. society.
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