nm - 1 Problem set 1. A monopolist has the following total...

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1 Problem set 1. A monopolist has the following total cost curve: TC ( Q ) = aQ + bQ 2 ; a;b > 0 where Q is the output produced. The demand curve for output is P ( Q ) = d eQ; d;e > 0 where P ( Q ) is the price that consumers are willing to pay for Q units of output. will equate marginal cost to price. 2. Competitive equilibrium with declining cost industry? ± Let there be n F . After paying F , the q units is cq . So total cost for producing q is: TC ( q ) = F + cq Average cost is TC ( q ) q = F q + c Which is declining in q . ± Note that marginal cost is @TC ( q ) @q = c a, If the price of output is p > c Can there be a competitive equilibrium in this case? b. If the price of output is
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nm - 1 Problem set 1. A monopolist has the following total...

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