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Unformatted text preview: o not distribute. _________________________________________________________________________________________________
Example 3: Suppose a monopolist has a linear demand curve: Assume that , and that the firm has constant returns: Assume Summary of a monopolist regulated by a government which chooses output to maximize social welfare
If output where is less than or equal to capacity or
if ( )
() “Force” the monopolist to produce where
“Force” the monopolist to charge for all units If output where
is greater than or equal to
capacity or if ( )
“Force” the monopolist to produce where
“Force” the monopolist to charge a price between
the monopoly price. However, most texts set and Let’s check when case A will be the solution. Set: The solution will be case A so long as: In this case: The solution will be case B so long as: In this case:
ECO 204 Chapter 16: Analysis of Firms with Market Power (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. [ , If the regulator places a 100% weight on consumer surplus then: __________________...
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- Fall '14
- The Land