How much deadweight loss will your firm create

Reference no: EM13184130

The total cost of production for your firm is 5000 + 200Q, where Q is your level of output.

(a) For what levels of output does your firm have economies of scale? Is this a case for natural monopoly? Why?

(b) Now assume you are a monopolist, and the demand for your product is P=2000-5Q. What price will you charge? How much deadweight loss will your firm create?

(c) Now assume your firm is subject to regulation, where price is set equal to average cost. Now what will your price be? How much deadweight loss will your firm create?

(d) After the election, you decide your firm is not making enough money. So you hire the lobbying firm C&E. C&E are able to convince regulators that you should set your price equal to 110 percent of your (average) costs. Now what is the price and deadweight loss?

Reference no: EM13184130

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