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Assume that you are an industry consultant. You are called in to consult on two different international analyses. For each of the scenarios below, show all your calculations very carefully!
Scenario 1
Begin your analysis by finding a benchmark socially efficient level of output. Then compare the competitive industry level of output with the monopolistic level of output. Show all your calculations. The industry is in Kenya. Your initial assessment shows that the general inverse demand function for the market is P = 400-8Q. Further analysis has indicated that the external marginal cost is 7Q. The internal marginal cost is twice the external cost.
Scenario 2
Begin your analysis by finding a benchmark socially efficient price and level of output. Then calculate the monopolistic price and level of output. Finally calculate the threshold dollar amount that the monopolist should budget for lobbying to bar price regulation to take prices to the socially optimal level. Show all your calculations. The industry is in Bangladesh. It is a monopolistic industry. Your initial assessment shows that the general inverse demand function is P = 80-4Q. Further analysis has indicated that the cost function is C(Q) = 16Q.
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