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Assume a single good, and utility to consumers, U(y) = 16(1.0 e'Y/4) where y is quantity of the good Also assume that the cost to
Assume a single good, and utility to consumers, U(y) = 16(1.0 e'Y/4) where y is quantity of the good Also assume that the cost to produce y is C(y) = yz + y (i) Derive the inverse demand function p(y) (ii) For Marginal Cost pricing, obtain the quantity produced (and consumed), yMC , and the price pm (Two decimal points are adequate) (iii) For Monopoly markets obtain the quantity produced, yMp , and the price pMp (iv) Compute the loss in Social Welfare (= sum of Consumer and Producer Surplus) in going from Marginal Cost to Monopoly Pricing (This loss is generically called Dead Weight Loss, denoted by DWL)
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