Consider once again the microchip market described in Problem 9 of Chapter 7. Demand for microprocessors is given by P = 35 - 5Q, where Q is the quantity of microchips (in millions). The typical firm’s total cost of producing a chip is Ci = 5qi, where qi is the output of firm i.
a. Suppose that one company acquires all the suppliers in the industry and thereby creates a monopoly. What are the monopolist’s profit-maximizing price and total output?
b. Compute the monopolist’s profit and the total consumer surplus of purchasers.