(20 points) Consider a market with inverse demand given by P (Q) = 120 Q. Suppose that there is only one potential supplier who is choosing whether to enter the market. If the firm chooses the product, it will have the cost function C(Q) = 2Q2 + F , where F > 0.
(7 points) For what values of F will the firm enter?
(7 points) Suppose that F = 200. Calculate the total surplus in the market.
(6 points) Suppose that the firm is forced by a government regulation agency to behave as if the market was perfectly competitive. What is the welfare effect of this regulation?