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Regulation of monopolies
A monopolist hospital faces the following demand curve for diabetes screening: Pd=100-2Qd where Pd is price of delivery and Qd is the demand for delivery in a hospital. The hospital’s is MC=Q for deliveries and the fixed costs are zero.
Total Revenue = P*Q= (100-2Q) * Q = 100Q – 2Q2
Marginal Revenue = derivative of Total Revenue = 100 – 4Q
Total cost = Integral of Marginal Cost = (1/2)Q2
What is the unregulated price and quantity that the hospital will choose?
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