1.

Suppose that Intel has a monopoly in the market for computer chips. In order to

produce X computer chips, it costs Intel C(X) = 2X

2

.

(a)

Find the marginal cost of producing a computer chip for Intel.

(b)

The demand for computer chips is X D =12 0.25P. Find the level of output that

maximizes Intel's profits. What price is Intel charging?

(c)

What level of output would maximize economic efficiency (competitive output) in

the computer chip market?

(d)

Suppose the government knew the demand and production functions. Find a

price regulation the government could impose that would induce Intel to

maximize total surplus, i.e., produce the efficient quantity from part (c).