homework6spring2011

A whatisthemarketequilibriumwithoutregulation b

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Unformatted text preview: ope”
method
for
finding
MR
works
both
when
 your
demand
curve
is
solved
for
Q
and
when
it
is
solved
for
P.
 
 
 2.


 Natural
Monopoly:
Suppose
a
local
utility
company
has
a
TC
function
given
by
 TC=400+4Q.
The
demand
is
given
by
P=120‐4Q,
and
the
MC
is
constant
at
$4.

 
 a.

 What’s
the
equation
for
the
ATC?
 b.

 If
the
government
decides
to
regulate
the
industry
through
MC
pricing,
 what’s
the
minimum
subsidy
necessary
to
keep
the
firm
in
business?
 c.

 Suppose
this
firm
is
regulated
and
told
that
it
must
produce
at
least
15
 units
of
the
good
and
that
it
should
select
that
price
and
output
given
its
 cost
curves
that
will
result
in
the
firm
earning
zero
economic
profit.
Given
 this
regulatory
directive,
what
price
and
quantity
wil...
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This note was uploaded on 12/04/2013 for the course ECONOMICS 101 taught by Professor Kelly during the Spring '10 term at Wisconsin.

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