Consider a monopoly with the following marginal cost and demand curves: MC=2Q+200,p=2,600−2Q d. Do the welfare analysis of the equilibrium resulting from the monopolist’s profit-maximization. That is, calculate the consumer surplus, producer surplus, and deadweight loss (if it exists). e. Suppose there is a positive externality associated with the consumption of the good provided by this monopolist. Does the market structure (monopoly) exacerbate or alleviate the inefficiency (deadweight loss) resulting from such externality? Use math or a graph to support your answer. f. Suppose instead that there is a negative externality associated with the production of the good provided by this monopolist. Each unit produced generates a marginal external cost of x dollars. For which value of x does the under-provision inherent to the monopoly completely offset the inefficiency associated with such externality?
Consider a
MC=2Q+200,p=2,600−2Q
d. Do the welfare analysis of the equilibrium resulting from the monopolist’s profit-maximization.
That is, calculate the
e. Suppose there is a positive externality associated with the consumption of the good provided
by this monopolist. Does the market structure (monopoly) exacerbate or alleviate the inefficiency
(deadweight loss) resulting from such externality? Use math or a graph to support your answer.
f. Suppose instead that there is a negative externality associated with the production of the good
provided by this monopolist. Each unit produced generates a marginal external cost of x dollars.
For which value of x does the under-provision inherent to the monopoly completely offset the
inefficiency associated with such externality?
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