Janet's Silk Printing Company Is Located in a Small University

question 1

Essay

Janet's Silk Printing company is located in a small university town. The major portion of their business is custom printed sweatshirts for university bookstores. As a sideline they also retail printed sweatshirts locally. The local demand for sweatshirts is: Q = 200 - 5P. The average and marginal cost per printed sweatshirt is $8.
(a) Calculate output, price, and profit under the monopoly conditions they enjoy locally.
(b) To test other markets they contemplate opening retail outlets in several university towns where there will be numerous competitors. Calculate price and output under these perfectly competitive conditions.
(c) Compare the competitive and the monopoly price and output situations. Calculate the deadweight loss due to their monopoly position and explain its meaning.

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