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1. Panoramix is the sole provider of magic potions in the town of Gaul. His cost of production is TC(Q)=50+80Q+Q^2, so that the marginal cost is equal to MC(Q)=8+2Q . Demand for magic potion is characterized by P=110-2Q.
a. Due to regulation, Panoramix operates as a perfectly competitive firm. What is his production quantity and price?
b. When the industry deregulates, Panoramix now operates as a monopolist. What is his monopoly production and price?
c. Draw the graph of the market for magic potions, and on it label the points of production for Panoramix, as a perfectly competitive firm and as a monopolist.
d. What is the deadweight loss associated with monopoly production? Show on graph in part (c) and compute the amount of deadweight loss based on your answers in parts (a) and (b).
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