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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.
pricing under oligopoly
Q. Relation between average cost and marginal cost? Relationship between MC and AC are the following: If MC is below AC then AC should be falling. This is because, if MC
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How economics contributes to managerial functions However economics is variously defined, it's basically the study of logic andtechniques and tools, to make optimum use of ava
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classification of costs
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