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HW5Notes - What is the deadweight loss from the monopoly...

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Notes on HW 5 Ch. 12 #4 Assume that the costs given in the table are all long-run costs. In other words, there are no fixed costs. Also, the equation right below the table should read E F + E G = Q F + Q G . Finally, parts b and c will be easier to solve if you do them in terms of the firms’ profit functions, instead of the method on pages 12-4 or 12-8. Additional Problem for HW 5 Consider a firm in a competitive industry that has marginal production costs of $40 per unit and is confronted with demand Q = 100 - P. a. Calculate the competitive equilibrium. On a diagram, show the demand curve, marginal costs, and the competitive equilibrium. b. Now assume that a monopolist firm takes over the industry. Calculate the equilibrium and show it on the graph.
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Unformatted text preview: What is the deadweight loss from the monopoly? Shade it in on the graph with ////. c. Suppose that the industry emits air pollution that damages society at the rate of $10 per unit of output. Calculate the Pareto optimum and show it on the graph. d. Now what is the monopoly’s deadweight loss with respect to the Pareto optimal point? Show it on the graph with \\\\. e. Suppose that a regulator sets an emission fee equal to $10 per unit. Calculate the monopoly’s profit-maximizing point. Calculate the deadweight loss and show it on the graph with ::::. f. If a market is already distorted by the presence of a monopoly, is a Pigouvian emission fee good for society? Why or why not?...
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