A monopoly firm faces the demand function,

p

=

126

2

q

,

where

p

and

q

are price and quantity respectively. Its marginal

revenue function is given by

mr

=

126

4q

The monopoly's

marginal cost function is given by

mc

=

5

?

. There are no fixed

costs for this firm.

(a)

What is the monopoly's profit maximizing output? What price will

the firm charge?

b)

If the firm were to behave like a perfectly competitive market,

what would be the competitive price and quantity sold?

c)

At the competitive price, what would be the consumer surplus

and producer surplus?

At the monopoly outcome, what would be the consumer surplus and producer surplus?

(e)

At the monopoly outcome, is the demand elastic or inelastic?

Explain.