The demand for a certain good is given by the following equation:
D(p) = 10 - p.
The technology that can be used to produce this good is described by the cost function:
c(y) = 2y.
(a) Suppose there is a monopoly in the market. What is the optimal quantity produced ? What is the monopoly price? Denote optimal quantity and price with y*m, p*m. Represent the equilibrium in a graph in the (y, p) axis.
(b) Compute the monopolist's profits and indicate them in your graph.
(c) Suppose our monopolist decides to behave as a competitive firm. What would be the quantity produced and the price charged in this scenario? Denote them with y*c, p*c
(d) Compute the deadweight loss associated with the monopoly and indicate it in your graph.