1. A monopolist faces a market demand curve given byDemand: Q = 70 Psuch that the marginal revenue curve is MR = 70 2Q The monopolist faces the following cost structure:C = .25Q^2 5Q + 300such that the marginal cost curve is MC = .5Q 5 What output level will the monopolist choose in order to maximize profits? What is the price at this output level? What are the monopolists profits? What is the deadweight loss (in dollars)? Why does deadweight loss arise? 2. Suppose that demand and supply curves in the market for corn are Qd = 20,000 SOP and QS = 30P. Suppose that the government would like to see the price at $300 per unit and is prepared to artificially increase demand by initiating a government purchase program. How much would the government need to spend to achieve this? What is the total deadweight loss if the government is successful in its objective?
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