Question
1.(4) Policy-makers in transportation and other markets often attempt to achieve more competitive outcomes than the original market provides. Consider the policy option of opening
1.(4) Policy-makers in transportation and other markets often attempt to achieve more
competitive outcomes than the original market provides. Consider the policy option of opening entry into a market that is currently monopolistic and that entry, if allowed, would provide competitive options. Demand is given by: D=200-2P and MC is constant for all firms at $20.
a.(1) Calculate competitive outcomes and graph the result (P, Q and Total Welfare).
b. (1) Repeat a, only now the market is monopoly. Make sure to include a graph and calculate (P, Q and Total Welfare).
c.(2) Calculate the social cost difference between a and b above. What is this
cost/difference called?
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Macroeconomics Principles Applications And Tools
Authors: Arthur O Sullivan, Steven M. Sheffrin, Stephen J. Perez
7th Edition
978-0134089034, 9780134062754, 134089030, 134062752, 978-0132555234
