1. There are n firms operating in the competitive market for good 2. Each firm has the cost function c(q) = βq2. Solve for the equilibrium price p2.2. Now consider an alternative market structure while keeping the same group of consumers. Suppose the industry of good 2 is monopolistic, with the cost function c(q) = βq2. Solve for the equilibrium price p2. Does this market structure give an efficient equilibrium outcome? Briefy explain the intuition. Consider an economy with 2 consumption goods and N consumers, all with the sameutility function:α 1-au(x1, x2) = x²x²¯ª, where and a € (0,1).The goods prices are p₁ = 2 and p2. Among the consumers, half of them each haveincome y₁ and the rest have income y2.

Problem Setup:Consumers: There are NNN consumers, half with income y1 and the rest with income y2.…

Answered: Consider an economy with 2 consumption…

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter6: Consumer Choice Theory

Section: Chapter Questions

Problem 19SQ

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1. There are n firms operating in the competitive market for good 2. Each firm has the cost function c(q) = βq². Solve for the equilibrium price p₂.

2. Now consider an alternative market structure while keeping the same group of consumers. Suppose the industry of good 2 is monopolistic, with the cost function c(q) = βq². Solve for the equilibrium price p₂. Does this market structure give an efficient equilibrium outcome? Briefy explain the intuition.

Consider an economy with 2 consumption goods and N consumers, all with the same
utility function:
α 1-a
u(x1, x2) = x²x²¯ª, where and a € (0,1).
The goods prices are p₁ = 2 and p2. Among the consumers, half of them each have
income y₁ and the rest have income y2.

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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