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  3. 2 suppose a monopoly firm faces inverse market demand curve...

Question: 2 suppose a monopoly firm faces inverse market demand curve...

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2. Suppose a monopoly firm faces inverse market demand curve p a - bQ. Its average total cost (ACc) and marginal cost (MC) both equal c where c >0. Assume that a>0, a> c, and b> 0. Assume that the firm maximizes its profit. Depict and identify the following five concepts graphically (a) (i)the firms profit-maximizing output QM (ii) the corresponding price PM, (ii) the socially optimal output Q* (iv) the firms supernormal profit and (v) the deadweight loss. (b) Explain what the firms deadweight loss means.

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