Problem
1. Find the deadweight loss due to monopoly pricing in this scenario when demand is down-sloping and there are constant marginal costs. Suppose the price charged for the goods is $10. Marginal revenue and marginal cost cross where Q=100 and MR=$5. Suppose the socially efficient output is Q=110. Hint: Draw a picture & include with your submission!
2. Suppose a monopolist has marginal revenue of $5 and average revenue of $10 per unit when producing 75 unit of output. It also has marginal cost of $6 per unit and average total cost of $5 per unit. Is the monopolist currently maximizing its profits or should it change its behavior? Explain your reasoning. Hint: Draw a simple picture & include with your submission!
3. Draw two pictures to explain why a firm in monopolistic competition will operate at excess capacity but a perfectly competitive firm does not. Label the profit maximizing output and the efficient scale on each graph.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.