Ch14_homework - Chapter 14 Homework 1 You should be able to...

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Chapter 14 Homework 1. You should be able to do problems 14.1-14.3 , 14.5-14.8, 14.10 2. Do problem 14.6 adding the following sections: c2. Suppose the firm is capacity constrained and can only produce 15 units. Redo parts a. and c.. d2. Assume the firm can only charge a single fixed fee, solve for the optimal two part tariff. d3. Think about the way you answered d2. Why might this not really be optimal? Show that your answer is or is not really optimal. Hint: What if the firm decided to price one consumer out of the market completely? Problem: Consider a monopolist who produces output with cost function: C ( q ) = 4 q + 10 There are 2 types of consumers. One type has elastic demand given by: Q E = 48 - 2 P E The other has inelastic demand given by: Q I = 48 - P I a.) In the case that the monopolist cannot segment the markets, find the equilibrium price and quantity. Calculate consumer surplus. Compare this to the consumer surplus that would obtain in an analogous competitive market. Find the deadweight loss of monopoly.
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