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In: Economics

Suppose that dry cleaning market is perfectly competitive. In a market for dry cleaning, the inverse...

  1. Suppose that dry cleaning market is perfectly competitive. In a market for dry cleaning, the inverse market demand function is given by P = 200 -3 Q , and the (private) total cost of production for the aggregation of all dry-cleaning firms is given by CQ= Q2+12Q+3 . Finally, the pollution generated by the dry-cleaning process creates external damages given by the marginal external cost curve MEC = Q . Derive the marginal revenue function MR(Q) and marginal cost function MC(Q).

  1. Without any regulation, what are the profit-maximizing price and quantity
  2. Determine the socially efficient price and quantity.
  3. Suppose now that the market is monopolistic instead of perfectly competitive. What are the socially efficient price and quantity?

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Expert Solution

Rahul Sunny answered 1 year ago
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