1. Suppose a monopolist faces a market inverse demand p = 10-Q, and its marginal cost 

is constant at 4. Assume its fixed cost at zero. 

a) Draw on the same graph the monopolist’s demand, MR, and MC curves/lines. 

b) Calculate the profit-maximizing monopoly price, output, and profit. 

c) Calculate the Lerner index at the monopoly price, as well as the price elasticity at 

the monopoly output. 

d) Identify on your graph and calculate the social surplus under monopoly 

e) How much would this firm produce if it behaved competitively? 

f) Identify on your graph and calculate the social surplus if the firm behaved competitively. 

g) Identify on your graph and calculate the deadweight loss. 

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