Suppose one market has a demand curve ?(?) = 100 − ?? （1）If this market has...

Suppose one market has a demand curve ?(?) = 100 − ??

（1）If this market has many firms supplying the identical products to the consumers, and the industry has a cost function ?(?) = 2? ^2. What are the market equilibrium price and quantity?

（2）What is the price elasticity of demand at the market equilibrium in (1)?

（3）If this market has only one firm supplying the products, with cost function ?(?) = 2?^2. What are the market equilibrium price and quantity now

（4）What is the price elasticity of demand at the market equilibrium in (3)? What can we conclude about the monopoly's profit-maximizing behavior regarding the price elasticity of demand?

（5）Illustrate consumer surplus, producer surplus and the total social welfare (total surplus) for the two cases. Based on your comparison, discuss the arguments for and/or against the monopoly.

Expert Solution

Rahul Sunny answered 7 months ago

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