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3. Demand for beer in Germany is given by the equation Q: = 2U PIS, where Q is measured in barrels per day and P

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3. Demand for beer in Germany is given by the equation Q: = 2U PIS, where Q is measured in barrels per day and P is measured in euros. The aggregate marginal cost [or equivalently the inverse supply] for the domestic beer suppliers is given by the function MC = 16 + 2Q. Germans do not drink beer made in any other country. a. Suppose that there are 1 [t identical beer manufacturers in Germany. What is the co st function of each of these ten rms. b. Suppose that these 1 [t German beer producers act in a perfectly competitive fashion. [i] What is the price and quantity at the competitive equilibrium? (ii.] Calculate the producer surplus, consumer surplus, and any dead-weight loss. For the rest of this problem assume that instead of a competitive market, the German beer manufacturers form a trade group that chooses the quantity for each manufacturer to sell. This consortium, which is known as Brewers Unied for Really high Prices, or BURP, allows the ten brewers to act as a collusive monopoly and to set price as if they are a single monopolist c. [L] What is the price and quantity at the monopoly equilibrium? [ii.] Calculate the producer surplus, consumer surplus, and any deadweight loss. d. Suppose that the government attempts to limit beer consumption by the use of a price ceiling, which limits price to be no more than 45 Euros. [t] Calculate the equilibrium price and the quantities supplied and demanded in this new priceceiling distorted equilibrium when the firms behave as a collusive monopoly. [ii.] What is the dead weight loss that arises from the price ceiling when the beer producers collude? [iii] How does it compare to the deadweight loss in the absence of a price ceiling? e. Explain and provide the economic intuition for your answer in part c. f. [in a carefully labeled graph show the unregulated monopoly outcome and the price ceiling equilibrium. Make sure to show the producer and consumer surplus and any deadweight loss arising from the unregulated monopoly pricing and from the price ceiling

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