(Can I please have help answering question 5, ill write down the other questions for help but I dont need them answered)

Question 5 (20 marks)

Summarise everything you have learned from this exercise. What the main differences (if any) in the way entrepreneurs and economists view monopoly? Is monopoly always good or always bad for the social welfare? Explain by referring to your answers to Questions 1-4. Suppose you were to advise the policymakers on the way to deal with the firms who possess significant market power. What would be your main message? (15 marks)

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Question 3 (15 marks)

(a) In the talk Thiel discusses at length the fact that many economic agents (e.g. famous scientists and inventors) do not capture any share of the social value of the products they create. While, this is suboptimal from the individual point of view, what are the implications of this for the society as a whole? Why could this be a problem? Hint: This is an economics class, so the first thing you should think about is the term incentives! (10 marks)

(b) Discuss the ways in which policymakers can address the problem identified in (a). What are the pros and cons of these solutions? (5 marks)

Question 4 (25 marks)

Consider again the market studied in Question 2. The demand curve is given by P = 100 Q and the marginal cost curve is given by MC = 10. This time we are going to assume that firms must invest funds to develop the product before it can be sold in the market (think of a pharmaceutical company developing a new drug and incurring significant R&D cost in the process). Specifically, the development cost is given by F = 1, 000.

(a) Suppose that once one of the firms develops the product, other firms can easily copy it and enter the market. The resulting market structure will be a perfect competition. Will any of the firms have an incentive to develop the product? Why or why not? Compute the total surplus in this market. (10 marks)

(b) Now suppose that market is a monopoly. Will a monopoly firm have an incentive to develop the product? Why or why not? Compute the total surplus in this market. (10 marks)

(c) Which market structure delivers higher social welfare in this case? Explain. Can you think of any industries where this analysis would be applicable? Explain your reasoning. (5 marks)

Question 2 (25 marks)

As discussed in the talk, if you are starting a business, you should aim to be a monopoly. In other words, monopoly is the market structure that is optimal from the firm's owner point of view. What about the social point of view? Is monopoly unequivocally good or bad? Let's start addressing this question by considering a simple example.

Suppose that the demand curve is given by P = 100 Q and the marginal cost curve is given by MC = 10. This means that marginal cost is constant and does not depend on the quantity produced. Assume that the production process does not involve any fixed cost (F = 0).

(a) Suppose this market is perfectly competitive. Compute the equilibrium price and quantity, producer and consumer surplus, and total surplus in this market. Illustrate your answer with a graph. Make sure you label all relevant axes, lines and areas. Hint: What is the relationship between the marginal cost and the supply function for a competitive firm? (10 marks)

(b) Now suppose that this market is monopolised by a single firm. Compute the equilibrium price and quantity, producer and consumer surplus, and total surplus in this market. Illustrate your answer with a graph. Make sure you label all relevant axes, lines and areas. Hint: As we have seen in Lecture 5, the Marginal Revenue function of a monopolist in this case is given by: MR = 1002Q. (10 marks)

(c) Compare the value of total surplus in (a) and (b). Which market structure is better from the social point of view? Why? (5 marks)

Question 1 (15 Marks)

Consider the following statement from the talk:

"There are exactly two kinds of businesses in this world. There are businesses that are perfectly competitive and there are businesses that are monopolies, and there is shockingly little that is in between. This dichotomy is not understood very well because people are constantly lying about the nature of businesses they are in."