problem5

# problem5 - 4 Name three kinds of price discrimination 5...

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Problem Set 5 Econ 115 October 29, 2007 Recall the rules : [1] you should feel free to discuss the problems with others, but [2] in the end you must write up your own results. Be sure to indicate your name and your TAs name on your problem set and please staple loose pages. 1. Deﬁne (a) Arbitrage (b) Natural Monopoly (c) Monopsony (d) Oligopoly 2. Graph the deadweight-loss from monopoly and the transfer (as compared to perfect competition) of consumer surplus to producers. 3. Suppose that the market (inverse) demand curve is p = a - bq, where a and b are constants. Suppose that marginal cost is constant and equal to c . (a) What is the formula for the monopolist’s marginal revenue? (b) What is a monopolist’s price and quantity?

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Unformatted text preview: 4. Name three kinds of price discrimination. 5. Consider a monopolist with increasing returns to scale. (a) Graph the ﬁrm’s marginal and average cost if its cost function is C ( Q ) = F + cQ , where F and c are constants. (b) Add a demand curve to the same graph. Then indicate what quantities would i. Maximize the monpolist’s proﬁt ii. Maximize total social surplus 1 iii. Give the largest social surplus, subject to the constraint that ﬁrm proﬁts are positive 6. Write a short paragraph that agrees or disagrees with the following statement: In-creasing the length of patent protection is almost always good because it gives ﬁrms incentives to innovate. 2...
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problem5 - 4 Name three kinds of price discrimination 5...

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