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Consider an industry with a sole producer, a monopolist. The latter faces cost function C(Q)= Q/2 and aggregate (inverse) demand P(Q)=1 - Q (zero for Q> 1). Illustrate all your answers in a drawing
(a) What are the equilibrium quantity QM, price PM, pro?ts ΠM, consumer surplus CSM and total welfare WM for the case of non-discriminatory (uniform) pricing.
(b) Explain why for effciency, i. e. maximal total welfare, it must be the case that price equals marginal cost. Using this, compute the effcient quantity Q*.
(c) Finally, quantify the social cost arising from the monopoly by calculating the associated deadweight loss, telling you by how much the monopoly industry falls short of effciency.
Let there be two consumers A and B, each buying at most two units of a good. A values having one unit at £10 and having two units at £12 whereas B values having one unit at £8 and
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A cut in price from Br 1.50 to Br 1.20 leads demand for a product rise by 10% What would the price elastic of demand before this product ? interpret the result by identifying the t
Compare the price elasticity at two parallel demand curves at a given price. This has been explained in Fig above where two demand curves AB and CD are given that are parallel to e
Causes There are a number of explanations of the business cycle but changes in the level of investment seem to be the most likely. In the simplest Keynesian model an increase
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A monopolist faces a straight line demand curve which passes through the point Rs 10 per ton on the price-cost axis and through the point 8000 tons on the quantity axis. The fir
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Determine the Application of managerial economics Application of managerial economics isn't restricted to profit-seeking business organisations. Tools of managerial economics
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