The following figure shows the demand curve for Good X in a perfectly competitive market. Later, the government grants one of the firms the exclusive right to manufacture and sell Good X. MR represents the marginal revenue curve of the firm when it operates as a monopoly. The marginal cost of producing Good X is constant at $5.
a) What is the quantity supplied when the market is perfectly competitive? What happens to the quantity supplied once the market changes to a monopoly?
b) What is the market price when the market is perfectly competitive? What is the market price when the market changes to a monopoly?
c) Compare the consumer surplus when the market is perfectly competitive and the consumer surplus when the market is a monopoly. Is there any producer surplus or deadweight loss in either case? If yes, then how much?

Question

The following figure shows the demand curve for Good X in a perfectly competitive market. Later, the government grants one of the firms the exclusive right to manufacture and sell Good X. MR represents the marginal revenue curve of the firm when it operates as a monopoly. The marginal cost of producing Good X is constant at $5.
  a) What is the quantity supplied when the market is perfectly competitive? What happens to the quantity supplied once the market changes to a monopoly?
b) What is the market price when the market is perfectly competitive? What is the market price when the market changes to a monopoly? 
c) Compare the consumer surplus when the market is perfectly competitive and the consumer surplus when the market is a monopoly. Is there any producer surplus or deadweight loss in either case? If yes, then how much?

Quizplus · Accepted Answer

The Answer of The following figure shows the demand curve for Good X in a perfectly competitive market. Later, the government grants one of the firms the exclusive right to manufacture and sell Good X. MR represents the marginal revenue curve of the firm when it operates as a monopoly. The marginal cost of producing Good X is constant at $5.
  a) What is the quantity supplied when the market is perfectly competitive? What happens to the quantity supplied once the market changes to a monopoly?
b) What is the market price when the market is perfectly competitive? What is the market price when the market changes to a monopoly? 
c) Compare the consumer surplus when the market is perfectly competitive and the consumer surplus when the market is a monopoly. Is there any producer surplus or deadweight loss in either case? If yes, then how much?

The Following Figure Shows the Demand Curve for Good X