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
"The price of Brent crude oil has hit $111 a barrel and US crude also rose in price, as worries persist about the unrest in Libya". (BBC News, 2011) This quote, from the BBC news w

Question 1: "Motivation denotes to the degree of readiness of an organism to pursue some designated goal and implies the evaluation of the nature and locus of the forces, inclu

Suppose arm's demand curve is given by P = 120? Find the (value of) price elasticity of demand (point elasticity) for the demand curve when the price is $100. Is demand elastic or

Your project has an estimated cost for land reclamation to be realized at the end of 20 years from today for $70,000,000. If current bond long-term interest rates are 7% compounded

1.    Estimating Women's Labor Supply a.    The following regression was run for an estimate of the current women's labor supply curve: Where h i = hours of labor suppl


The aggregate demand curve shows the combinations of the price level and the level of output at which the goods and money markets are simultaneously in equilibrium. Let us now go o

What are three modifications to a polymer that can make it transparent? How will these modifications affect the mechanical properties of the polymer?

A bakery has fixed costs of $10 per day and variable costs of $1 per loaf. Its oven can handle up to 50 loaves a day and it is impossible to obtain additional capacity. Sketch the

Movie attendance dropped 8 percent as ticket prices rose a little more than 5 percent. What is price elasticity of demand for movie tickets? Could price elasticity be somewhat over