Question
In: Economics
The Demand for Spring-water is P = 13 - Q, where Q is quantity measured in...
The Demand for Spring-water is P = 13 - Q, where Q is quantity measured in hundreds of bottles per day and P is the price per bottle. Spring-water can be produced at a constant marginal (and average) cost of $1/ bottle. If the industry is perfectly competitive, how much will be produced and at what price in equilibrium? Explain why. Now suppose the industry becomes monopolized by one firm. What price will the monopolist charge if it must charge the same price to everyone? What quantity will the firm produce? Explain why. What will the firm’s profits be? How much economic surplus is lost as a consequence of the industry becoming monopolized? Find the change in both producer and consumer surplus. Suppose on the other hand, that the monopoly can practice perfect price discrimination. How much will it produce and why? What will its profits be? Why? What is the change in economic surplus compared to the competitive outcome. Why does your result differ from the case of the single-price monopolist?
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
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A monopolist faces the demand curve P =11 Q, where P is measured in dollars per...
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units. The monopolist has a constant average cost of $6 per
unit.
Answer the following questions, showing all workings.
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Calculate the
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and
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