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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.
Increase in demand SS is the supply curve and D 1 D 1 the initial demand curve shifts to the right, to position D 2 D 2 . P 1 is the initial equilibrium price and q 1
show how scarcity and opportunity cost are useful in decisionmaking
Q. Cheapening of Materials and Equipments? Expansion of an industry increases the demand for different kinds of materials and capital equipments. This will result in large scal
real GDP is increasingly criticized for its alleged failure to adequately measure the standard of living. To what extent do you think this criticism is valid?
Problem 1: Using relevant examples, discuss the pricing strategies that firms can use to capture value from their customers. Problem 2: You are a manager in a perfectl
When is production profitable according to price-taking firm at profit, break-even or loss? Production profitable at profit, break-even or loss: a. When TR > TC, in that cas
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Joe is evaluating the marketing strategy at his restaurant and inn. Suppose that in response to a $2.00 off sales promotion for spaghetti dinners, Joe finds that nightly dinner sal
diagram of a perfect competition
Why Do Monopolies Exist? Monopolists have market power and as a consequence will charges higher prices and generate less output than a competitive industry. It produces profit
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