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In: Economics

2. Consider a market where the demand is given by Y = 2 400 - 200p...

2. Consider a market where the demand is given by Y = 2 400 - 200p (i.e., the inverse demand is p = 12 – 0.005Y).

a) Assume for the moment that this market is perfectly competitive. In the short run, there

are 50 identical firms operating in this market with cost function c (yi) = 0.25y^2 +100. Find an individual firm's supply function, the industry supply function, the market price and the total quantity sold in the market, the individual firm's level of production, and the individual firm's profit.

(b) Assume that this market is a monopoly instead. The monopoly has a marginal cost function of MC (y) = 0.01y and a fixed cost of F = 1 000. Find the monopoly's marginal revenue, the monopoly quantity and price, the monopoly profit, and the dead weight loss caused due to the monopoly. Draw a graph to demonstrate the dead weight loss.

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Expert Solution

Rahul Sunny answered 1 year ago
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