ProbSet1_ProblemSet - AEM 331 Problem Set #1 Due 2/1/08 1....

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AEM 331 Problem Set #1 Due 2/1/08 1. (Contestability) You’ve just been hired at the Department of Justice, and as your first assignment, you are to analyze an industry with one producer and the following characteristics: Cost: C(Q) = 2*Q Inverse demand: P = 74 – 3*Q Also, there is equal access to the all resources used by the one producer. On a return visit to Cornell, you decide to attend a Cornell – Harvard hockey game. Although it’s a good game, you love to regulate so much that you continually ponder whether to break up the monopoly or not. a. On your left is a huge Harvard fan, who lives, breathes, and thinks in all ways old-school Harvard. You present your dilemma to him. What would he say would be the ultimate price, quantity, and welfare? b. On your right is your best friend from Chicago, who has been completely indoctrinated by their universities. What would she say would be the ultimate price, quantity, and welfare? 2.
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ProbSet1_ProblemSet - AEM 331 Problem Set #1 Due 2/1/08 1....

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