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ARE100B_09summer_HW2

# ARE100B_09summer_HW2 - ARE100B assignment 2 Summer Session...

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ARE100B, assignment 2 Summer Session II, 2009 University of California, Davis Department of Agricultural and Resource Economics Assignment 2 (Due Thursday, Aug. 13) Problem 1 : The industry demand curve for a particular market is: Q = 4,000 – 5P. The firm’s total costs is given by: TC = 100Q + 0.6Q 2 . For each of the three market cases below, you are to calculate: (i) market output and price, (ii) consumer surplus, and producer surplus, (iii) deadweight loss. (iv) Monopsony rents. (v) Lerner Index of Monopoly Power. (a) Perfect Competition (b) Single-Price (Pure) Monopoly (c) First Degree Price Discrimination Problem 2 : A monopolist is deciding how to allocate output between two markets. The two markets are separated geographically (East Coast and West Coast). The demand curves for each market are given as: q 1 = 100 – 2P 1 and q 2 = 150 – 2.5P 2 . Furthermore, the firm’s total cost function is given as: TC = 10Q = 10(q 1 + q 2 ) (a) If the firm can practice third degree price discrimination, calculate for each market the: (i) price, quantity, (ii) own-price demand elasticity, (iii) Lerner Index, (iv) profit for the firm.

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ARE100B_09summer_HW2 - ARE100B assignment 2 Summer Session...

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