2. Consider a pharmaceutical company considering research and development of a new drug. They estimate that demand for this new, innovative product (the only of its kind) is given by p= 200 - q, and the firm knows that once the drug is developed it can produce as much as it would like at a constant marginal cost of $10 (this implies a cost function of c(q) = 10q). (d) What is the socially optimal quantity of output, q*? (e) What is the value of the innovation to society if it was competitively/efficiently supplied? (f) Calculate the deadweight welfare loss we should expect if the firm produces the new drug as a monopoly.

True or false (A). A profit‐maximizing monopolist will produce output where marginal cost is equal to price (B). Suppose we know that a monopolist is maximizing profits. The monopolist has maximized the difference between marginal revenue and marginal cost. (C) In perfect competition, MUX = PX is the condition that ensures that firms produce the right things.

Suppose the demand for standard sized bottled water in the US is Qd=120-30.5P where Qd is monthly quantity demanded in millions and P is the price per bottle in dollars and cents. If the marginal private cost (MPC) of producing the bottled water is one dollar, calculate the market equilibrium quantity. Explain what a constant marginal cost implies. Does that mean the total opportunity cost of producing bottled water is unrelated to how many are produced? Let’s assume that the marginal private benefit (MPB) of bottled water equals the marginal social benefit (MSB). Explain what that means. At the equilibrium calculated in part A, what do you know about buyers’ willingness to pay in each transaction?

Exton and Shill are 2 firms that can control emissions at the following marginal costs: MC1 = 400q1, MC2 = 200q2, where q1 and q2 are the amount of emissions reduced by Exton and Shill, respectively. Assume that with no control at all, each firm would be emitting 25 units of emissions. Estimate the cost-effective allocation of emissions control needed if a total reduction of 30 units of emissions is necessary.

There are three demanders of a public good. Their demands are given by: P = 60 – Q P2 = 100 – Q P3 = 140 – Q Suppose the marginal cost of providing the public good is $180. What is the economically efficient level of production for the good? Of the three consumers, who would be willing to pay for this public good? Show this on a graph. (а) (b) Suppose the marginal cost of providing the public good is $60. What is the economically efficient level of production for the good? Of the three consumers, who would be willing to pay for this public good? Show this on a graph. Suppose the marginal cost of providing the public good is $350. What is the economically efficient level of production for the good? Of the three consumers, who would be willing to pay for this public good? Show this on a graph. (c) Suppose the free-rider problem leads to this public good not being provided. Suppose the marginal cost is $180. What is the size of the DWL due to this failure.

The marginal benefit of reducing pollution and the marginal cost of reducing pollution are given by the following equations: MB = -2U2 + 18, and MC = 2U2 + 2, where U is the number of units of pollution abatement. What is the optimal number of units of pollution abatement? A) o B) 1 C) 2 D) 3 E) 4

Exton and Shill are 2 firms that can control emissions at the following marginal costs: MC1 = 400q1, MC2 = 200q2, where q1 and q2 are the amount of emissions reduced by Exton and Shill, respectively. Assume that with no control at all, each firm would be emitting 25 units of emissions. Estimate the cost-effective allocation of emissions control needed if a total reduction of 30 units of emissions is necessary.

(A) Suppose that the two firms merge. Write down the profit function of the merged firm. Calculate the profit maximizing level of output, the amount of pollution for the merged firm, and its profit. Is the merger Pareto improvement? Why or why not? (B) Suppose that the merger is forbidden by the government. Instead, now the fishery has the property right to water. In other words, anybody who wants to pollute the water needs to buy a pollution right from the fishery. Let the price of the pollution right be Px. Write down the steel mill’s new profit function and the fishery’s new profit function. (C) Calculate the profit maximizing level of output for each firm, the amount of pollution, and the price of pollution right. please, please answer the three questions together..

The travel time (t) on the segment of a highway connecting city A with city Bhas been observed to follow the equation below, as a function of traffic flow(v): t = 15 + 0.02v, where t and v are measured in minutes and vehicles perhour, respectively. The demand function for travel connecting the two cities isv = 3500 – 120t.a) Determine the equilibrium time and traffic flow.b) If the length of the highway segment is 30 kilometres, what is the averagespeed of vehicles traversing this segment at equilibrium conditions?

Consider an industry with two firms that emit a uniformly mixed air pollutant (e.g., carbon dioxide). The marginal abatement cost functions for Firm 1 and Firm 2 are: MAC1 = 100 - e1 MAC2 = 100 - 4e2 Aggregate emissions for the industry are denoted as E = e1 + e2. 1. In an unregulated environment how many units of emissions does each firm emit?             Firm 1’s unregulated level of emissions ____________             Firm 2’s unregulated level of emissions ____________             Total unregulated level of emissions ______________ Suppose a regulator has a goal of reducing the total level of emissions from the amount from the amount you answered in [1] to 25 units. The regulator would like to achieve the goal of 25 units of total emissions in a cost-effective way. To do so it issues 25 permits, 10 are given to Firm 1 and 15 are given to Firm 2. A firm can only emit a unit of pollution if they have a permit for that unit, otherwise they must abate. After the permits are allocated,…