aps6 - Intermediate Microeconomics - Wissink BRIEF ANSWERS...

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Intermediate Microeconomics - Wissink BRIEF ANSWERS TO PROBLEM SET #6 1a. True, unless their demand curve is completely elastic (unlikely), or they successfully practice 1st degree price discriminate, or they are confronted with a price ceiling or regulated marginal cost pricing. b. False. They may very well be, but there are no internal forces making it necessarily the case. c. False. At p M all that is demanded is X M , so there is no shortage. d. False. They may very well have profit = 0, but there are no market forces making it necessarily the case. e. False. Under the monopoly solution there is a positive amount of dead-weight-loss. There is lost producer surplus and lost consumer surplus that isn't transferred to the monopolist. Therefore net social surplus is smaller under X M than under X*. 2 a. srs firm => x S = ½p - 5; SRS mkt => X S = 500p - 5000 b. If demand is p = 40 - 1/250X => X D = 10,000 - 250p => p* = 20 => X* = 5,000 => x* = 5 => N = 1000 => profit = 25 => NSS* = (½)(30)(5000)
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aps6 - Intermediate Microeconomics - Wissink BRIEF ANSWERS...

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