A local electricity company produces and distributes electricity to residential customers. The firm is a monopoly and it is regulated such that p = MC. The firm faces the following demand function: p = 800 – 2g and its total cost function is: C = 22500 + 200q + q². a) Find the deadweight loss that would result if this company was allowed to operate as a profit maximizing firm, compared to the situation under regulation. b) Calculate the Lerner index of Monopoly Power at the profit maximizing point.
A local electricity company produces and distributes electricity to residential customers. The firm is a monopoly and it is regulated such that p = MC. The firm faces the following demand function: p = 800 – 2g and its total cost function is: C = 22500 + 200q + q². a) Find the deadweight loss that would result if this company was allowed to operate as a profit maximizing firm, compared to the situation under regulation. b) Calculate the Lerner index of Monopoly Power at the profit maximizing point.
Algebra for College Students
10th Edition
ISBN:9781285195780
Author:Jerome E. Kaufmann, Karen L. Schwitters
Publisher:Jerome E. Kaufmann, Karen L. Schwitters
Chapter12: Algebra Of Matrices
Section12.CR: Review Problem Set
Problem 37CR
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Transcribed Image Text:A local electricity company produces and distributes electricity to residential customers.
The firm is a monopoly and it is regulated such that p = MC. The firm faces the
following demand function: p = 800 – 2g and its total cost function is: C = 22500 +
200g + q².
a) Find the deadweight loss that would result if this company was allowed to operate
as a profit maximizing firm, compared to the situation under regulation.
b) Calculate the Lerner index of Monopoly Power at the profit maximizing point.
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