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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.
Disadvantages of Perfect Competition There is a great deal of duplication of production and distribution facilities amongst firms and consequent waste. Economies of sc
law of demand
1. The price of a U. S. produced hammer is $5. The exchange rate with Malaysia is 3 Ringgit/1$. What is the current price of the hammer in Malaysia? (Assume no transportation cost.
explain the supply function and importance of supply analysis in brief
A complementary facility for commodity-related shortfalls in export earnings This is the most recent proposal of the Group of 77 at UNCTAD in June 1979. There they requested
Q. What do you mean by Theory of Firm? Microeconomics especially the theory of firm, assumed importance and attracted considerable attention in the early 20 th century. This sh
The Current Account This records all transactions involving the exchange of currently produced goods and services and is subdivided into i. Visibles: A record
diagram of a perfect competition
Two competing firms are each planning to introduce a new product. Firm 1 will decide whether to produce product A, product B or product C, while firm 2 can choose between products
Problem: Long-Run Labor Demand and Factor Substitutability Suppose there are two inputs in the production function, labor (L) and capital (K), which can be combined to produce
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