Suppose a perfectly competitive industry can produce Roman candles at a constant marginal cost of $10 per unit. Once the industry is monopolized, marginal costs rise to $12 per unit because $2 per unit must be paid to politicians to ensure that only this firm receives a Roman candle license. Suppose the market demand for Roman candles is given by

QD = 1,000 – 50P

and the marginal revenue function by

MR = 20 – Q/25

a. Calculate the perfectly competitive and monopoly outputs and prices.

b. Calculate the total loss of consumer surplus from monopolization of Roman candle production.

c. Graph and discuss your results.