Find the exact the area of the welfare loss of the monopoly- Microeconomics
A market has linear market MC (might be supply) and demand curves. No one will buy the good if the price is above $80 and no one will sell the good if the price is below $20. The equilibrium price and quantity if this market is perfectly competitive would be $40 at a quantity of 20. The profit maximizing quantity for a monopolist in this market is 12.
a) Calculate the sum of the consumer and producer surpluses if this is a perfectly competitive market.
b) Draw a picture of the demand, MR and MC of the firm if this is a monopoly. Put all the given numbers in the diagram and indicate the welfare loss (or social cost or excess burden) of the monopoly in the diagram.
c) What numbers would you need to calculate to find the exact the area of the welfare loss of the monopoly? Find them and calculate the loss.
