3. (a) Compare monopoly P and consumer surplus you obtained in question 1
with question 2. Which P is higher? Which CS is higher?
(b) Can you think of reasons why one P is higher than the other? Similarly,
can you think of reasons why one CS is higher than the other? Explain
in a few sentences. Do you think in one market the monopolist has more
power than the other? [hint: roughly estimate the elasticity of demand
for question 1 and 2. Use the elasticities to compare the P and CS from
both questions.]
(c) If monopolist could charge a second price in both the figures to the un-
served market, do you think the consumer surplus and economic profit
would be higher? Why or why not?
(d) If other firms could enter this business where the monopolist is operating,
would they enter? Why?
3