Question: 3 . Use the figure below, which shows the linear demand and constant cost conditions facing a firm with a high barrier to entry, to
Use the figure below, which shows the linear demand and constant cost conditions facing a firm with a high barrier to entry, to answer the following questions. Points. points each
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a The profitmaximizing price is $ qquad and the firm will produce units. The firm earns economic profit of $ qquad
b Suppose antitrust officials find a way to remove the entry barrier to this market, and the market becomes perfectly competitive. Assuming that demand and cost conditions remain the same, what price and quantity will result? How much consumer surplus will buyers in this market gain?
c How much deadweight loss is caused by the market power created by the high entry barrier?
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