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
Assume that Jimmy Cash has $2100 in his checking account and uses his checking card to withdraw $210 from his ATM machine. By what amount did M1 change from this individual transac

Automobiles arrive at the Elkhart exit of the Indiana Toll Road at the rate of two per minute. The distribution of arrivals approximates a Poisson distribution. A) What is the prob

Consider the case of cleaning up chemical contamination at an industrial site. The marginal benefits of additional cleanup are decreasing as the amount of cleanup increases. Howeve

Explain the Gains from Trade of market. Producer Surplus, Consumer Surplus, Gains through Trade and Efficiency of Markets: Consumers and producers both are better off since

As is the case with the supply and demand function for a single business firm determining the equilibrium price and output for its product, the aggregate supply and aggregate deman

explain the structure of the economy and its impact on the gdp of sountry.

TRADE AND DEVELOPMENT: In the earlier Units of this block, you have learnt about the trade policy from historical perspective and the recent shift in policy during nineties. Y

An investor has a choice of 2 investment opportunities. The first investment yields a gain of $2800 with probability of 0.37, a gain of $1100 with probability of 0.27, and otherwis

Is the natural rate of unemployment fixed? Why or why not? How are full employment and the natural rate of unemployment related? Is the actual rate of unemployment currently greate