HW1,Sp2000

# HW1,Sp2000 - EEP101/ECON125 Spring 00 Prof D Zilberman GSIs...

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EEP101/ECON125 Spring 00 Prof.: D. Zilberman GSIs: Malick/McGregor/St-Pierre Problem Set 1: due Tuesday, February 15, 2000, in class (Late assignments will not be graded.) Part A: Numerical Problems 1. We have a market where the market (inverse) demand function is given by p = 400 – Q, where p is the price in dollars and Q is the total quantity demanded. The marginal cost of production (mc) is given by mc = 40 + 2Q and the marginal external cost (mec) is given by mec = 10 + 0.5Q. a) Determine the socially optimal level of output (Q*), and the total external cost (TEC*), consumer surplus (CS*) and producer surplus (PS*) at this level of output. What is total welfare W*? b) Determine the equilibrium price a monopolist is likely to charge (p m ) and the equilibrium output that results (Q m ). c) Determine the consumer surplus (CS m ), the producer surplus (PS m ), and the total external cost (TEC m ) under monopoly. What is the deadweight loss (DWL m ) in this case? d)

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HW1,Sp2000 - EEP101/ECON125 Spring 00 Prof D Zilberman GSIs...

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