1. Suppose inverse demand is linear: P(Q)=AbQ. The constant average (and marginal cost) of production for all firms is c. (a) Derive the elasticity of demand. (b) Derive the monopoly price and quantity as a function of the parameters of the model. (c) Derive the competitive price and quantity as a function of the parameters of the model. (d) How does the elasticity of demand, the monopoly price, and the exercise of market power depend upon A ? Explain. [You may have to take a derivative, again making this question optional.] (e) What are the determinants of the dead-weight loss from monopoly pricing? Explain. (f) How does the dead-weight loss depend on A? Explain. (g) Assume two different demand specifications p1=10q1 and p2= 556q2. Let c1=c2=c=1. i. Show that at the competitive outcome the quantities are equal. ii. In which market does a monopolist exercise greater market power? Explain. iii. Confirm the dead-weight loss is greater in the inelastic market. 1. Suppose inverse demand is linear: P(Q)=AbQ. The constant average (and marginal cost) of production for all firms is c. (a) Derive the elasticity of demand. (b) Derive the monopoly price and quantity as a function of the parameters of the model. (c) Derive the competitive price and quantity as a function of the parameters of the model. (d) How does the elasticity of demand, the monopoly price, and the exercise of market power depend upon A ? Explain. [You may have to take a derivative, again making this question optional.] (e) What are the determinants of the dead-weight loss from monopoly pricing? Explain. (f) How does the dead-weight loss depend on A? Explain. (g) Assume two different demand specifications p1=10q1 and p2= 556q2. Let c1=c2=c=1. i. Show that at the competitive outcome the quantities are equal. ii. In which market does a monopolist exercise greater market power? Explain. iii. Confirm the dead-weight loss is greater in the inelastic market