Answer Happy

O 1) (20 Points) A monopoly faces the following demand, marginal-revenue, and marginal-cost curves: Demand: 45 - 20 Marginal Revenue: 45 - 4Q Marginal Cost: 20 + Q a) (10 Points) i. Graph these three curves. ii. What quantity does the monopoly produce if it wants to maximize profit? Show these results on your graph. What price does it charge? Show these results on your graph. b) (5 points) Given a price ceiling 40 percent below the monopoly price derived in part (a). i. What quantity would be demanded at this new price? ii. Would the profit-maximizing monopoly produce that amount? Explain. iii. Does this price ceiling create a shortage? What size shortage would the price ceiling create? Explain. c) (5 Points) Calculate the size of the deadweight loss generated by this monopoly under the profit 8.3, Round this number down). Show the deadweight loss on your graph. 0 o maximizing Quantity and Price found in part (a) (Hint: 25 3