There is a monopolist, Concrete Mex, in the concrete market in Mexico. The demand function is Qd= 100-50p. The marginal cost of production is c = 0.4. a) ConcreteMex claimed the high price is due to high transportation costs and persuaded the government to help cut down the costs. As a result, for every unit of concrete sold, the government subsidizes ConcreteMex 0.2 dollars. What are the new profit maximizing price and production level for ConcreteMex? b) Under the subsidy policy and the new price in a part, calculate the consumer surplus, producer surplus, and deadweight loss. You do not need to consider government spending for the deadweight loss. c) Suppose ConcreteMex wants to enter a different market, the competitive market in Texas. To enter the market, ConcreteMex needs to pay a fixed cost of F = 1, and its variable cost in Texas is VC = (0.4+Q)Q. What is ConcreteMex’s total cost, marginal cost, and average total cost in Texas at production level Q?
There is a monopolist, Concrete Mex, in the concrete market in Mexico. The demand function is Qd= 100-50p. The marginal cost of production is c = 0.4.
a) ConcreteMex claimed the high price is due to high transportation costs and persuaded the government to help cut down the costs. As a result, for every unit of concrete sold, the government subsidizes ConcreteMex 0.2 dollars. What are the new profit maximizing price and production level for ConcreteMex?
b) Under the subsidy policy and the new price in a part, calculate the
c) Suppose ConcreteMex wants to enter a different market, the competitive market in Texas. To enter the market, ConcreteMex needs to pay a fixed cost of F = 1, and its variable cost in Texas is VC = (0.4+Q)Q. What is ConcreteMex’s total cost, marginal cost, and
Step by step
Solved in 2 steps
