natural monopoly, Macroeconomics

1. Consider a natural monopoly.

I. Show graphically and discuss how price and quantity are set by the natural monopolist.

II. Define the areas corresponding to the consumers' surplus and the natural monopolist's profit.

III. Compare the latter areas with the ones corresponding to the consumers' surplus and the industry's profit in a market in which price is set at the marginal cost level.

IV. By looking at these areas, define the difference in the social welfare between the natural monopoly and a market in which price is set at the marginal cost level.

V. Show graphically and discuss the two most common solutions to regulate the price of a natural monopolist.

vi) For either regulatory solution, define the areas corresponding to the consumers' surplus and the natural monopolist's profit.

VI. By looking at these areas, define the attained social welfare for either regulatory solution.

VII. Discuss which solution should be implemented by the government.

2. Show graphically and discuss the effects of the introduction of a subsidy to the consumers who decide to take the new vaccine for the swine flu. The subsidy is intended to cover all direct and indirect costs of taking the vaccine (travel expenditure, time spent) and is set by the government to a level equal to the marginal external benefit of the vaccine.

3. Consider a public good game, in which two individuals, A and B, each with an endowment of £2, independently and simultaneously decide whether to put their money into a private or into a public account. All individual contributions into the public account are pooled together and multiplied by a factor equal to

1.2. The utility to each individual are UA = 2- qA+ 1.2*(qA + qB) and UB = 2- qB+1.2*(qA + qB), respectively. Represent the table of players' payoffs for this public good game. Discuss the optimal strategies, the Pareto optimum and the Nash equilibria of the game.

If you choose to submit for assessment this problem set (out of 2), you should handle in to the School Admin. Office before 2pm on Wednesday 20th October. Problem sets submitted after the deadline will not be counted.

Posted Date: 2/25/2013 4:09:39 AM | Location : United States







Related Discussions:- natural monopoly, Assignment Help, Ask Question on natural monopoly, Get Answer, Expert's Help, natural monopoly Discussions

Write discussion on natural monopoly
Your posts are moderated
Related Questions
A negative outflow to the U.S. balance of payments is generated by the purchase of United States assets (such as United States Treasury bonds) by foreign investors and the sale of

what is automatic stabilizer, example with diagram or graph please

The project has been split into four main chapters; literature review, data and methodology, results and a conclusion. The appendix contains the estimated tables and graphs, of whi

If demand increases and the supply increases also, then what will happen to the new equilibrium price and equilibrium quantity? Explain what is happening with the curves and how pr

Flossy has a quasi-linear utility function, 16q1^0.5 + q2. The price of good 1 is fixed at one. Thus, Flossy's budget constraint is q1 + p2q2 =Y, where Y denotes income. 6.1 Compu

Application of Theory of Consumer Behavior As already discussed earlier, the theory is an important tool to interpret and analyse demand curves. Apart from its usefulness as a

Why do some countries have a high real per capita income? High standard of living within the industrialized nations consider to be largely because of the high productivity of

Need answers for the questions (Chapters 10, 11 & 12) Please see attached questions. Thanks!

what is the company lidted in NASDAQ that is included in the dow jones industrial average

Use the distinction between the charasteristics of private and public goods to determine whether the following should be produced through the market system or provided by the gover