In this problem, the inverse demand function is 100 – Q, and marginal cost is 90 – Q/2. A monopolist dominates this Internet industry. The government orders the firm to produce at the point where the price equals marginal cost. (a) Why might the government think that this level of output would increase economic efficiency?
In this problem, the inverse demand function is 100 – Q, and marginal cost is 90 – Q/2. A monopolist dominates this Internet industry. The government orders the firm to produce at the point where the
(a) Why might the government think that this level of output would increase economic efficiency?
(b) Now calculate the output level at which price equals average cost, and calculate profit. Why might the monopolist prefer this output level to the one in which price equals marginal cost?
(c) How can the government induce the
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Economic efficiency refers to a condition of affairs in which all resources are distributed properly to best serve each individual or institution while minimising waste and inefficiency. Any modifications made to aid one entity would harm another when an economy is economically efficient.Economic efficiency promotes the equitable distribution of commodities and services to all members of a community. Businesses can easily distribute their items and price them in a way that benefits both the company and its customers in an efficient economy. What criteria do you use to assess economic efficiency?When you eliminate waste to create a certain number of goods or services, you've achieved efficiency.
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