hw1 404.pdf - ECON 404 A Industrial Organization Price Analysis Homework Assignment 1 Yuya Takahashi 4=15=2019 Solve the following three big questions

hw1 404.pdf - ECON 404 A Industrial Organization Price...

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ECON 404 A: Industrial Organization & Price Analysis Homework Assignment 1 Yuya Takahashi 4 = 15 = 2019 Solve the following three big questions. The full score is 100. Question 4 is optional, but if you solve it correctly, you will earn extra points. Students are encouraged to work as a group, but each student should write her/his own answer, including the STATA part. The due is 4/23/2019 in class. 1. (66 points in total) Answer the following questions. (a) (6 points) Suppose the cost function is given by TC ( q ) = F + cq where F; c > 0 : At what output level is the average cost minimized? (b) (6 points) Consider a monopoly market. Demand is given by Q ( p ) = 100 ° p and the total cost function of the monopolist is TC ( q ) = 10 q: Find the pro°t maximizing quantity and price. Calculate the consumer surplus and the dead-weight loss due to monopoly (the di/erence in total surplus between the case of perfect competition and monopoly). (c) (6 points) Consider a monopoly market. Demand is given by Q ( p ) = 100 ° p and the total cost function of the monopolist is TC ( q ) = 10 q +800 : If the government imposes the average cost pricing restriction, how much would the price and dead-weight loss be? (d) (6 points) Consider a monopolist producing a product and selling the product in two di/erent markets. Assume that the monopolist can charge two di/erent prices in these two markets. Demand in these markets are given by Q 1 ( p ) = 100 ° 2 p and Q 2 ( p ) = 50 ° 1 2 p; respectively. The cost function of this monopolist is TC ( q 1 + q 2 ) = 1 2 ( q 1 + q 2 ) 2 :
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