Demand function

Q_A=75-P

Q_B=25-4P

500 identical consumers with each following individual demand function

Market Demand: Q= 500(Q_A+Q_B) =500(75-P + 25-4P)= 500(100-5P)= 5000-2500P

Production Function: Q (L,K) =0.5L^0.5K²

2. Suppose that the output market is a monopoly and the input markets are still competitive.

a. Characterize the short run equilibrium for the economy. Be clear about the equilibrium prices of output and inputs, and the quantities of output and inputs.

b. Characterize the long run equilibrium for the economy, including the prices of output and inputs, the quantities of output and inputs.

c. In the long run equilibrium, calculate the total surplus of the economy.

d. Compare the long run equilibrium outcome and total surplus to that of the unregulated and perfectly competitive market. Calculate the deadweight loss.