Suppose E-Mobile purchases every gas company in the world and set their prices. Then it would have a control of the gas market with no other competition. Thus E-Mobile becomes a monopolist in providing gas. The market demand curve faced by E-Mobile is P = ?Q+40, and E-Mobile's cost is given by C = Q^2+140,and the marginal cost is given by MC = 2Q.
a) What is the equation for E-Mobile’s Marginal Revenue curve?
b) Draw the Demand Curve, Marginal Revenue Curve, Average Cost Curve and Marginal Cost Curve for this monopolist in a graph. Label your graph carefully and completely.
c) What is the monopolist’s profit-maximizing production quantity Qm? What price will the monopolist charge Pm? Show that in a graph.
d) Compute the consumer surplus, producer surplus and profits for the monopolist.
f) Suppose this market was a perfectly competitive market (i.e. the monopolist's demand curve is still the market demand curve, but now there are mnay firms providing gas for the market). Given the market is perfectly competitive, what would be the equilibrium price (Ppc) and quantity (Qpc) in this competitive market?
g) Assume the technological change in the market is still true. What is the difference between the consumer surplus in the monopoly case and the consumer surplus in the perfect competition case?
h) What is the deadweight loss caused by the monopolist?