Question one.

Solve the following questions.

A. Draw and insert a graph showing where a monopolist would produce, the gain in producer surplus compared to a perfect competition firm and the dead weight loss to society. Hint you will have to add a marginal cost and marginal revenue curve. Monopolist is a price Maker. He will determine the quantity of output that will maximize revenue. The monopolist faces a downward sloping demand curve because he can sell more if he lowers the price. The profit maximizing price and output is where marginal revenue equals marginal cost, then it is extended to the market demand curve to determine what market price corresponds to that quantity. MC= D is socially optimal and which a competitive firm will produce. In monopoly, the price is higher and output smaller than a perfectly competitive firm. So there is deadweight loss. The producer surplus is above the supply curve (MC curve is supply curve for a monopolist) and producer surplus is larger in monopoly than in a perfectly competitive firm. invrapally S yoB. How does the demand curve a perfect competitor faces different from the one a monopolist faces? Relate this to the market demand curve. The demand curve for a perfectly competitive firm is horizontal as it is a price taker and can sell any amount of goods at that price. The demand curve for a monopolist is downward sloping as it can sell more units only by lowering the price of the good. II. Read Economics for Life Lesson #45, p 76-77 and answer the following. Will a monopolists charge the highest price they can get? Why or why not. 2. Can a monopoly be good for some sorts of efficiency? Why or why not