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Suppose that the inverse demand curve is: p(q) = a − bq, and the cost function is: c(q) = cq.
(c) How much consumer surplus is generated when the price is p*? How much producer surplus is generated at p*
(d) If the monopolist can only set a linear price (that is, a fixed price per unit sold), what price will it set? How much consumer surplus and producer surplus is generated at that price and quantity? Illustrate the deadweight loss in this case.
(e) If the monopolist can charge a two-part tariff, where it charges a fixed fee to consume anything and a variable fee per unit of quantity sold, what fee and marginal price will it choose?
(f) What is the consumer surplus and producer surplus in this case? Prove that producer surplus has increased. What has happened to deadweight loss?
Which of the following is least likely to be part of the opportunity cost of a college degree? An increase in the interest rate is expected to cause the optimal level of human capital investment for an individual to:
Calculate the loss of economic welfare caused by the monopolistic . If some of this lost welfare would have been producer surplus, why is the monopolist willing to forgot this surplus?
A monopoly is considering selling several units of a homogeneous product as a single package. A typical consumer’s demand for the product is Qd = 110 - 0.25P, and the marginal cost of production is $160. Determine the optimal number of units to put i..
You have just graduated from college and received a job offer from a local company as a project engineer. The job pays an annual base salary of $55,000, which is paid at the end of every year. In addition, the company offers you an immediate bonus of..
Suppose the income elasticity of demand for visits is +1.4. A consumer was spending $157 on visits and her income doubles. She will now spend $____.
Since 2005, the production of oil in the USA has increased dramatically The price of oil has fallen from $70 per barrel to $45 per barrel. This additional production has been very expensive, with operating cost around $55 per barrel to produce. From ..
Suppose that a profit maximzing monopolist’s marginal costs increase at all output levels. What is likely to happen to the quantity the monopolist produces, AND the price it charges? Support your answer.
Assume an open, mixed economy (C + I + G + X = real GDP) and an MPS of .2 What is the multiplier? The result will be a $200B decline in real GDP. Was this policy of increasing government spending and taxes by the same amount expansionary, contraction..
Illustrate what assumptions do you make in answering this question. Illustrate what distortions do you think would appear in economy if such a tax were introduced.
This problem explores the issue of truthfulness in the Stable Matching Problem and specifically in the Gale-Shapley algorithm. The basic question is: can a man or a woman end up better off by lying about his or her preferences? More concretely, suppo..
The local apple stand sells apples for 50 cents each. They raise their price to 75 cents. The store was selling 100 apples a day but now they sell 50 apples a day. Calculate total revenue before and after the price change. List both answers i.e. befo..
Which of the following is a valid reason as to why prices will not always adjust to changes in spending?
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