Question: Suppose inverse demand is linear: P(Q) = A bQ. The constant average (and marginal cost) of production for all firms is c. (1) How does

Suppose inverse demand is linear: P(Q) = A bQ.

The constant average (and marginal cost) of production for all firms is c.

(1) How does the elasticity of demand, the monopoly price, and the exercise of market power depend upon A? Explain.

(2) What are the determinants of the dead-weight loss from monopoly pricing? Explain.

(3) How does the dead-weight loss depend on A? Explain

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