opolist's costs are C(q) = 2q (a) Obtain the equilibrium of this industry and the monopolist's market power. Consider now an aluminium recycling industry. The aluminium available in period "t" can be recycled in the following period "t+1". Let "x" belongs to [0,1] be the fraction of aluminium recycled. The recycling cost is C(x) = x/(1-x). Consid
Consider a monopolist who produces aluminium and faces a demand given by: (please see attached photo).
The monopolist's costs are C(q) = 2q
(a) Obtain the equilibrium of this industry and the monopolist's market power.
Consider now an aluminium recycling industry. The aluminium available in period "t" can be recycled in the following period "t+1". Let "x" belongs to [0,1] be the fraction of aluminium recycled. The recycling cost is C(x) = x/(1-x). Consider a 2-period model "t" belongs to {1,2} in which the recycling industry is competitive. Consider a discount factor (d = 0.8).
(b) Obtain the equilibrium in the aluminium market in each period and the market power of the monopolist.
(c) Does the existence of a recycling industry improve the welfare of society? If so, how much would the government be willing to contribute to develop this industry?
(d) What would be expected to happen with qt when "t" is a continuous variable. In particular, what would happen in the long run? ("t" --> infinity) Plot the equilibrium quantity "q" vs "t", where the benchmark of perfect competition and monopoly in this market is appreciated. (Hint: obtain a solution for t=3 and infer the answer based on the results in discrete time).
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