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7. (5pts) Suppose Amazon has a natural monopoly on online shopping. We will define the product simply as units. The marginal cost of production per

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7. (5pts) Suppose Amazon has a natural monopoly on online shopping. We will define the product simply as "units\". The marginal cost of production per unit is $10. The demand for goods is given as: 00') = 200 2? Where quantity is measured in millions of units, price is in dollars per unit. a. What do we know about Amazon's long-run average total cost curve? Why? (1pt) b. Calculate: i. Amazon's prot maximizing price and quantity: (0.5pt) Qmon = PM = ii. The social surplus maximizing quantity and price (In the short-run, don't worry about Amazon exiting)? (0.5m) Qopt = P03}: = c. Name the most efficient policy that the government can implement to deal with Amazon's monopoly power in the long-run? (1pt) d. Amazon can choose to charge different customers different prices based on the data they have collected. Suppose Amazon collects enough data on all of its consumers so it knows each person's maximum willingness to pay. i. What price would Amazon charge each customer for goods? (0.5pts) ii. How would this affect the following (relative to 94.}? [Choose the most accurate from Maximize/lncrease/No-effect [Decrease [Minimize] (0.5pts} Social surplus: Consumer surplus: Producer surplus: e. Suppose Amazon adopts the practices in part (d). However, there is a perfectly competitive market in reselling products bought on Amazon (g on eBay). Describe why this might upset Amazon's approach to pricing in (cl). (1pt) (Note: Requires careful thinking]

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