a. Suppose the marginal social cost of clothes dryers is given by MSC = 2Q. Further suppose that the monthly demand for clothes dryers is given by the equation Q = 40-P. What is the efficient level of monthly output of clothes dryers? b. If clothes dryers are sold in a monopolistic market, graphically show that the monopolist's optimum output will be less than the efficient output. (Note: No calculations are required here). c. Given that the marginal revenue for our monopolist can be written as MR = 40 - 2Q, illustrate the loss in efficiency due to monopoly power in this market. What is the dollar value of the loss? (Remember the formula for the area of a triangle is (base) (height)).

a. Suppose the marginal social cost of clothes dryers is given by MSC = 2Q. Further suppose that the monthly demand for clothes dryers is given by the equation Q = 40-P. What is the efficient level of monthly output of clothes dryers? b. If clothes dryers are sold in a monopolistic market, graphically show that the monopolist's optimum output will be less than the efficient output. (Note: No calculations are required here). c. Given that the marginal revenue for our monopolist can be written as MR = 40 - 2Q, illustrate the loss in efficiency due to monopoly power in this market. What is the dollar value of the loss? (Remember the formula for the area of a triangle is (base) (height)).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Perfect Competition

It is the structure of the market that is said to exist when with many buyers and sellers exchanging similar commodities and its price is fixed by the market forces, demand, and supply, and a single firm cannot cause an impact over the price or market value of the homogenous product. This structure of the market is called perfect competition.

Question

4.
a. Suppose the marginal social cost of clothes dryers is given by MSC = 2Q.
Further suppose that the monthly demand for clothes dryers is given by the
equation Q = 40 - P. What is the efficient level of monthly output of
clothes dryers?
b. If clothes dryers are sold in a monopolistic market, graphically show that
the monopolist's optimum output will be less than the efficient output.
(Note: No calculations are required here).
c. Given that the marginal revenue for our monopolist can be written as
MR = 40 - 2Q, illustrate the loss in efficiency due to monopoly power in
this market. What is the dollar value of the loss? (Remember the formula
for the area of a triangle is (base)(height)).

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