PS1_ECON160SSI10 - ECON 160, SUMMER 10 WANER GU UC...

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1 ECON 160, SUMMER 10 WANER GU UC RIVERSIDE PROBLEM SET #1 (Total Points: 30) DUE: in class, Wednesday, JUNE 30, 2010 1. (8 points) Consider the market for sunglasses. Suppose the market demand function is Q = 2000- 5 P . The sunglasses can be produced at a constant average and marginal cost of $20 per pair. 1.1). (2 points) Calculate the producer’s total revenue and marginal revenue. 1.2). (2 points) Calculate the market equilibrium output and price under perfect competition. Find the elasticity of demand at equilibrium. 1.3). (2 points) Calculate the market equilibrium output and price under monopoly. Find the elasticity of demand at equilibrium. 1.4). (2 points) Calculate consumer, producer, and total surpluses for both equilibrium situations 1.2)- 1.3). What is the total welfare loss due to the presence of a monopoly? 2. (4 points) 2.1). (2 points) Show that in the monopoly equilibrium, the Lerner Index ( LI = ( P - MC )/ P ) equals to the inverse of the elasticity of demand (1/ η
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This note was uploaded on 07/26/2010 for the course ECON ECON-003 - taught by Professor Das during the Winter '09 term at UC Riverside.

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PS1_ECON160SSI10 - ECON 160, SUMMER 10 WANER GU UC...

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