What is the dwl to society of having this market monopolized

Assignment Help Macroeconomics

Reference no: EM13203546

Assume that firms each face a total cost function of TC = 10 + 5Q to produce artificial Christmas trees. Note that this total cost function indicates that there is a constant marginal cost (MC) of $5 per tree produced (i.e., MC = $5). Suppose that American Tree, one domestic producer, convinces Congress that because its production methods are the safest in the industry, it should be allowed to be the only supplier of artificial trees to American consumers. Congress agrees and awards American Tree the only license in the country to produce and sell artificial trees. Suppose the market demand and marginal revenue (MR) for artificial trees is given by:

P = 100 - Q (Inverse demand curve)
MR = 100 - 2Q (Marginal revenue curve)

a. Graph your results found in part a). Be sure to completely label your graph.
b. Calculate the loss of consumer surplus from the monopolization of fireworks production.
c. What is the monopolist's profit (graphically and numerically)?
d. What is the DWL to society of having this market monopolized versus competitive?

Reference no: EM13203546

Questions Cloud

Explain solutions depending on whether n is odd or even : denote the n:th derivative, ie. ex. n=2 means the second derivative. Show that the equation h^(n)x = h^(n+2)x has two distinct general solutions depending on whether n is odd or even

What is the number of degrees of freedom : Where Qx is the quantity demanded of Product X, Px is the price of X, Y is income, and r is the prime interest rate (given in decimals, e.g., 0.02 or 0.05) The standard error of each estimated coefficient is given in parentheses below it.

What will be jeffs expected utility from the gamble : Jeff holds $50,000 wealth which has a utility of 7.07 utils (assuming utility is the square root of wealth in thousand dollars). He considers investing this in a gamble which has a 0.6 probability of increasing his total wealth to $100,000 and 0.4..

Determine the optimal solution to the lp relaxation : Find the optimal solution to the LP Relaxation. Round down to find a feasible integer solution. Is this solution optimal? c. Find the optimal solution.

What is the dwl to society of having this market monopolized : Suppose that American Tree, one domestic producer, convinces Congress that because its production methods are the safest in the industry, it should be allowed to be the only supplier of artificial trees to American consumers.

How much work is done in stretching the spring : A force of 7 pounds is required to hold a spring stretched 0.1 feet beyond its natural length. How much work (in foot-pounds) is done in stretching the spring from its natural length to 0.7 feet beyond its natural length?

Explain gaussian elimination algorithm : If the Gaussian elimination algorithm with scaled partial pivoting is used on the example shown, which row will be selected as the third pivot row

What is the next value : What is the next value?

Explain parametric equations for the line through : Parametric equations for the line through {1,2,3} parallel to the vector {5,6,-4} are, A friend taking the old-fashioned course tells you that the xyz-equations for this line are

User Account

All Pages