Question: Monopoly Price/Output Decision. The Hair Stylist, Ltd., has a monopoly in the College Park market because of restrictive licensing requirements, and not because of superior operating efficiency. As a monopoly, the Hair Stylist provides all industry output. For simplicity, assume that the Hair Stylist operates a chain of salons and that each shop has an average cost?minimizing activity level of 750 hair stylings per month, with Marginal Cost = Average Total Cost = $20 per styling.

Assume that demand and marginal revenue curves for hair stylings in the College Park market are

P = $80 - $0.0008Q

MR = $80 - $0.0016Q

Where P is price per unit, MR is marginal revenue, and Q is total firm output (stylings).

A. Calculate the competitive market long-run equilibrium activity level, and

the monopoly profit?maximizing price/output combination.

B. Calculate monopoly profits, and discuss the monopoly problem from a social perspective in this instance.