Question
An industry has the following cost function: C(X, Y ) = 1500+20X +20Y . Market demands for the 2 goods are given by PX =80X,
An industry has the following cost function: C(X, Y ) = 1500+20X +20Y . Market demands for the 2 goods are given by PX =80X, and PY =1402Y
(b) Find the Ramsey prices at which a monopolist would just break even (make 0 profit). Equate X and Y and solve for the best (from a social welfare point of view) common amount of X and Y that pays the firm zero profit. Are these good prices for a regulator to impose? Explain.
Please provide a breakdown of the calculations as I'm stuck on how to continue with it and need to understand it for my midterm.
Thanks in advance!
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