Would there be welfare cost relative to competitive market

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Assume the market demand for Terps t-shirts can be written as P = 100-2Q, where prices are measured in dollars. The long-run average cost of producing such a t-shirt is $20.

a. What would the long-run equilibrium price and quantity be if the market for Terps t-shirts were perfectly competitive?

b. Suppose Under Armour was granted a license by University of Maryland to be the exclusive provider of college apparel. What level of output would Under Armour produce and what price would they charge?

c. If Under Armour could perfectly price discriminate, how much profit would it earn? Would there be any welfare cost relative to a competitive market?

Reference no: EM131102754

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