2 Production with xed costs A rm has cost function The market for the output good has aggregate demand function D(p) 2 maa 39,0}: where Q is a demand parameter. 1. Plot the marginal and average cost curves. What is the efficient scale of production? 2. Suppose 5 = 6. How much does the firm produce in partial equilibrium when it is a pricetaker? What about when it is a monopolist? 3. Repeat the previous part for a = 1. (Hint: Check whether the firm shuts down!) 4. Now suppose a = 9/5. How much does the rm optimally produce when it is a monop- olist? Does a partial equlibrium exist when the firm is a price taker? Draw a diagram with supply and demand curves plotted to illustrate why or why not. 5. Assume a = 6. 011 a new graph, plot the demand curve, marginal cost curve, and marginal revenue curve. Shade in the consumer surplus, the firm's variable prots, and the dead-weight loss under monopoly pricing. Calculate the size of the dead-weight loss