Consider an industry with inverse demand p (y) = 200 - y and total cost TC = 40y. a) What are the total gains to trade in this industry? (number). Find the HHI index of this industry with one firm, a monopoly. (one number) b) Find the optimal level of output and the price of a monopoly assuming uniform pricing (give two numbers). Illustrate its choice in a graph. Mark a DWL. c) Find profit and a DWL if monopoly uses the first-degree price discrimination. d) Find the aggregate output, the price and the markup in a Cournot-Nash equilibrium with N firms (all functions of N ). What is the limit of the markup function as N goes to infinity? Why?
Consider an industry with inverse demand p (y) = 200 - y and total cost TC = 40y. a) What are the total gains to trade in this industry? (number). Find the HHI index of this industry with one firm, a monopoly. (one number) b) Find the optimal level of output and the price of a monopoly assuming uniform pricing (give two numbers). Illustrate its choice in a graph. Mark a DWL. c) Find profit and a DWL if monopoly uses the first-degree price discrimination. d) Find the aggregate output, the price and the markup in a Cournot-Nash equilibrium with N firms (all functions of N ). What is the limit of the markup function as N goes to infinity? Why?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Consider an industry with inverse demand p (y) = 200 – y and total cost TC = 40y.
a) What are the total gains to trade in this industry? (number). Find the HHI index of this industry
with one firm, a monopoly. (one mumber)
b) Find the optimal level of output and the price of a monopoly assuming uniform pricing (give two
numbers). Illustrate its choice in a graph. Mark a DWL.
c) Find profit and a DWL if monopoly uses the first-degree price discrimination.
d) Find the aggregate output, the price and the markup in a Cournot-Nash equilibrium with N firms
(all functions of N). What is the limit of the markup function as N goes to infinity? Why?
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