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Question 4 Part 1 Mr. Cheung is a local monopolistic swimming coach. The table below set out the market demand schedule of the swimming lesson of Mr. Cheung. Mr. Cheung teaches at Excellent Swimming Centre, which charges a one-off membership fee of $300. Mr. Cheung pays $200 per hour to Excellent Swimming Centre for using the swimming pool. Class fee per hour Quantity (no. of 1-hr class per day) $600 $500 1 $400 $300 3 $200 a) Mr. Cheung is a single-price monopoly. What is his profit-maximizing quantity of lesson hours per day? How much does Mr. Cheung charge? What is his profit per day? Show your calculation clearly. (10 marks) b) Suppose the local community who are interested in taking swimming classes consist of old people and young children. What can Mr. Cheung do to increase his profit? (2 marks) Part 2 For a monopolistic competition market, a) draw a diagram to show the short-run economic loss made by a firm. You should show marginal revenue (MR), demand (D), average total cost (ATC), and marginal cost (MC) curve in your diagram. (6 marks) b) explain and illustrate using your diagram in (a), how the exit of firms results in a new, long-run equilibrium. (7 marks)