The demand for good X is given as P-40-4Q. Firm A is a monopolist producing good X with the following total cost function: TC-80+4Q+0.5Q2. Suppose the government is considering deregulating this market in order to make the market for good X perfectly competitive.
a) What is the equilibrium output and price when firm A acts as a monopolist?
b) What is consumer surplus and producer surplus when firm A acts as a monopolist? Show your work.
c) What is the equilibrium output and price if the government makes this market perfectly competitive? (Round your final answer to two decimal places)
d) What is consumer surplus and producer surplus when the market is perfectly competitive? Show your work.
e) How much does social welfare (i.e., total surplus) increase when the market moves from monopoly to perfect competition? Explain your answer.