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2. The city's internet service provider (ISP) is a regulated natural monopoly that has a cost function, C(Q. N) = 1, 000 + AN +

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2. The city's internet service provider (ISP) is a regulated natural monopoly that has a cost function, C(Q. N) = 1, 000 + AN + 3Q, where N is the number of households, and Q is the total number of gigabits supplied per day. Please retain (at least) 4 decimals as you work through this problem. There are 50 high type consumers each with demand, 91 = 8 - -Ph and 30 low type consumers with demand, 91 = 4 - -PI Each q; is gigabits downloaded per household per day. Market demand therefore is, Qa(p) = (50) * qh(P) + (40) * q; (p). Start with the assumption that the monopolist is profit maximizing and is unconstrained (i.e. no regulation). (a) (10 points) What price would a uniform price monopolist charge? Calculate profit and deadweight loss. (b) (20 points) If the monopolist had perfect information, find the monopolist profit-maximizing "menu" of pricing: two different prices for two different fixed quantities of data ("blocks" of gigabits). Find the monopolist's profit

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