Since TC 500 Qe and MC 1 then P 50 01Q 1 Hence Qe 490 units Therefore CS can be

Since tc 500 qe and mc 1 then p 50 01q 1 hence qe 490

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market, P = MC. Since TC = 500 + Qe and MC = 1, then P = 50 0.1Q = 1. Hence, Qe = 490 units. Therefore, CS can be calculated as
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ECON90015 Hence, CS = $12,005 Therefore, the regulated price is higher than the unregulated price. The price is lower when MC = $25.5 but higher than $1 and the output generated more at 490 units. b) - ANSWER 3 a) The inverse demand function for this market is P = (150 Q)/2 Since Q = Q1 + Q2, then P = (150 - Q1 - Q2)/2 The duopolies’ reaction function is their profit maximizing quantity, which is expressed in terms of the other firm’s quantity. So the function form Q1 = f(2Q2) must be found. First, Best Note’s optimal Q1 needs to be found. Using the profit maximizing condition that MR = MC and applying this to the firm’s residual demand function, P = (150 - Q1 - Q2)
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