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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.
Suppose a firm's budget were large enough to employ 100 units of either labor or capital, the cost of a unit of labor being the same as a unit of capital. The production function i
Write on one theory of profit. Profit as rent of ability: one of the most widely known theories of profit was propounded by F.A. Walker. According to him profit is the rent of is t
Factors affecting the total market demand These are broadly divided into the determinants of demand and conditions of demand. (a) Own price of the product This
Problem 1: All economies of the world can be said to be ‘mixed', to a greater or lesser degree, in that there is no economy where there is no state activity and no economy wher
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.
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A chemical producer dumps toxic waste into a river. The waste decreases the population of fish, decreasing profits for the local fishing industry by $100,000 per year. The firm cou
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Explain Managerial economics according to Mote and Paul Haynes, Mote and Paul: "Managerial economics refers to those characteristics of economics and its tools of analysis mos
Use a computer regression package, to work these two computer exercises. 2. Ozark Bottled Water Products, Inc. hired a marketing consulting firm to perform a test marketing of its
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