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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.
Another vital relationship that is often referred to in economic analysis is the relationship between consumption expenditure andprice elasticity. From the law of demand, we know t
williamson model and managerial discretion about its objective and statement of problem
Q. Product of marginal revenue? MRPL is the product of marginal revenue and marginal product of labour or MRPL = MR x MPL. • Derivation: MR = ?TR/?Q MPL = ?Q/?L
Arguments against Monopoly However monopolies have been accused of the following weaknesses. Diseconomies of scale While the monopolistic firm ca
Prices of other related goods i) Substitutes: If X and Y are substitutes, then if the price X increases, the quantity demanded of X falls. This will lead to inc
Cross-elasticity is the measure of responsiveness of demand for a commodity to the changes in price of its substitutes and complementary goods. For example, cross-elasticity of dem
What is producer surplus? “The more the competition among the sellers, the less the producer surplus enjoyed by the producers” – do you agree with the statement. Justify your answe
what is deadweight loss calculation?
Please read the case study given below and answer questions given. Case Study Electron Control, Inc., sells voltage regulators to other manufacturers, who then cu
Question: EITHER Nowadays, there is an urgency in Mauritius to introduce a rapid transit system in order to reduce traffic congestion and shift towards a more efficient mode
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