1. Asssume the following equations describe the conditions for an unregulated monopoly: Qd = q = 25,000 -100P or P = 250-0.01q TC = 480,000 + 70q + 0.005q2 where Qd is the quantity demanded for the firm, P is the commodity's price in dollars, TC is total cost in dollars, and q is the quantity of output produced. Based upon the above equations, answer the following questions: a. What is the firm's profit maximizing quantity of output? b. What price will the firm charge for the commodity c. What does the firm's total economic profit equal? d. What is the amount of deadweight loss that exists given the monopoly is unregulated? Assume the government is now going to regulate this monopoly, and the regulators want to guarentee the monopolist produces the socially optimal quantity of output. e. What is the socially optimal quantity of output? f. What price would regulators establish to guarantee the monopolist produces the socially optimal quantity of output? g. What does the firm's total profit equal? Assume the government is going to regulate this monopoly, and the regulators want to guarantee the monopolist receives a normal rate of return. h. Given the proposed regulation, what quantity of output would the monopolist produce? i. What price would regulators establish to ensure the monopolist receives a normal rate of return? j. What is the amount of the deadweight loss that exists given the monopolist receives a normal rate of return?
1. Asssume the following equations describe the conditions for an unregulated
Qd = q = 25,000 -100P or P = 250-0.01q
TC = 480,000 + 70q + 0.005q2
where Qd is the quantity demanded for the firm, P is the commodity's price in dollars, TC is total cost in dollars, and q is the quantity of output produced. Based upon the above equations, answer the following questions:
a. What is the firm's profit maximizing quantity of output?
b. What price will the firm charge for the commodity
c. What does the firm's total economic profit equal?
d. What is the amount of
Assume the government is now going to regulate this monopoly, and the regulators want to guarentee the monopolist produces the socially optimal quantity of output.
e. What is the socially optimal quantity of output?
f. What price would regulators establish to guarantee the monopolist produces the socially optimal quantity of output?
g. What does the firm's total profit equal?
Assume the government is going to regulate this monopoly, and the regulators want to guarantee the monopolist receives a normal
h. Given the proposed regulation, what quantity of output would the monopolist produce?
i. What price would regulators establish to ensure the monopolist receives a normal rate of return?
j. What is the amount of the deadweight loss that exists given the monopolist receives a normal rate of return?
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