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
why and how is price level determined by the monetary sector in the classical model?

Suppose that a firm has a budget of $30,000, that the wage rate is $10 per hour, and that the rental rate is about $100 per hour. I f the wage rate increases to $15 per hour and th

The system where workers concentrate on specialized tasks to make a product is referred to as: A. Coincedence of wants B. Roundabout production C.Freedom of enterprise

Monetarism This school argues that disturbances within the monetary sector are the principal causes of instability in the economy. According to monetarists, the money supply i

To determine of the wealth is earned by nations by economic activates all around the globe. Gross National Income comprises the total value of goods and services formed within a

Trade in Services - strategic considerations: India has emerged as a major exporter of services, bringing about a change in our negotiating position at the WTO. India's trade

INDEX NUMBERS OF PRODUCTION  Among the commonly used economic indicators to monitor current trends in the economy are indices of production. The main aggregative indices used t

An engineer who was in the business of customizing software for small construction companies repay a loan that she got 3 years ago at 7% per year simple interest. If the amount she

what does a weaker dollar to a) raise inflation and contract the economy b) reduce inflation and contract the economy c) raise inflation and expand the economy d) reduce inflation

What are the Two types of money In most countries, one can identify two "types of money": Currency and coins Bank deposits Total value of all the money in a