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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.
Average Revenue (AR) This is the revenue per unit of the commodity sold. It is obtained by dividing Total Revenue by total quantity sold. For a firm in a perfectly competiti
Using the discounting principle calculate the present value of an annuity of five years at Rs. 500 payments made at the end of each of the next five years at 10% interest. stion..
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McDonalds has been operating in many Asian countries such as China, Singapore and Japan. However, McDonalds has yet to open its ?rst restaurant in Vietnam, a country with over 80 m
KEYNESIAN VIEW ON UNEMPLOYMENT Keynes in his General Theory presented a view that fluctuations in aggregate demand (AD) influences the equilibrium level of output. Thus
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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
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needs for capital budgeting
Types of Public Debt Public debts can be classified according to the purpose for which the money was borrowed into; a. Reproductive Debt: where a loan has been
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