Microthusiasm is a monopolist enjoying patent protection on its microeconomic model contact lenses. It is currently making economic profits.

(a) Draw a graph for Microthusiasm. Make sure to label:

i. Microthusiasm's profit-maximizing quantity, Qf

ii. Microthusiasm's profit-maximizing quantity, Pf

(b) Shade the area of consumer surplus involved in Microthusiasm's profit-maximizing production.

(c) If Qf = 5,000 units and Pf = $5, what is Microthusiasm's total

(d) Microthusiasm is awarded a lump-sum subsidy to encourage microeconomics education. Its fixed costs therefore decrease. Illustrate the effect of this on your graph from part (a).

(e) How would the change from part (d) affect Microthusiasm's economic profit and the deadweight loss? Explain each.

(f) What would need to be the case for Microthusiasm to be a natural monopoly?

(g) A change in consumer tastes shifts the demand curve for Microthusiasm's product to the left. At what resulting price range would the monopoly firm produce in the short run but exit the market in the long run?

(h) Microthusiasm’s patent expires and its market structure becomes perfectly competitive. What would happen to its profits in the long run?