The Suji Corporation manufactures chemicals, and has marginal costs M C = 3Q, total costs T C = 2, 000 + 1.5Q2 (so average total costs AT C = 2, 000/Q + 1.5 ∗ Q) and an industry demand curve (not necessarily firm demand curve)P =1,000−5Q (so MR=1,000−10Q). 

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(a) Suppose Suji is in perfect competition - it faces a horizontal demand curve at P = 375. Graph the MC and Firm Demand curves. How much will it produce? What will its profit be? What will consumer surplus be (using the industry demand curve)? Show these answers on your graph. (b) Now suppose Suji is a monopolist. Again, graph MC and Firm Demand (which in this case is the same as industry demand) How much will it produce, and how much will it profit? What is consumer surplus here? Show these on your graph as well. (c) Calculate the deadweight loss: the difference in total surplus (consumer surplus plus profits) between the two situations. (a) Suppose Suji is in perfect competition - it faces a horizontal demand curve at P = 375. Graph the MC and Firm Demand curves. How much will it produce? What will its profit be? What will consumer surplus be (using the industry demand curve)? Show these answers on your graph. (b) Now suppose Suji is a monopolist. Again, graph MC and Firm Demand (which in this case is the same as industry demand) How much will it produce, and how much will it profit? What is consumer surplus here? Show these on your graph as well. (c) Calculate the deadweight loss: the difference in total surplus (consumer surplus plus profits) between the two situations.

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Given Marginal cost MC 3Q Total cost TC 200015Q2 Average total ... View the full answer