Compute the following microeconomic equations. If any parts need reclarification please leave a comment.
Consider a city Where there are one million identical households. Each household has the following inverse demand curve for electricity: P=200-QQ where Q is the quantity demanded per household per year and p is the price per unit. (i) Suppose that electricity is supplied by perfectly competitive rms, at a constant marginal (ii) (M {V} cost of $50 per unit. There are no xed costs. Find the equilibrium price and the equilibrium quantity demanded per household per year. Denote this quantity by Q\" Where the subscript c in QC indicates that this is the outcome under perfect competition. Now suppose that the perfectly competitive rms merge into a single rm [a monopoly). The marginal cost remains tmchanged Assume that the monopoly is required by a regulatory agency to charge a single price What is the single price that Inaximiza the monopoly's prot? Denote this price by 1.1,,l and the associated quantity demanded {per household per year) by Qm. Find the monopoly's prot, and denote it- by if . Find the ratio meQc. Compute the deadweight loss under singieprice monopoly. b Now suppose that the regulatory agency changes its mind and aliens the monopoly to use a twoblock pricing scheme. The monopoly can announce a rst quantityblock 21 {per household per year} such that the price per unit- for all units in this rst block is equal to p(Q1}, and a second quantityblock (Q; (2;) such the price per unit for all units in this second block is equal to p[Qg]. If any household wants to buy more than (2; units per year, it must pay for each of these additional units the price [1((22) per unit. \"(rite the monopoiy's prot as a function of Q1 and Q2. Denote by Q} and Q; the solutions for Q1 and (22 that maximize the monopoly's prot. Find Q1, Q5 and the associated prices pi = p[Q and p; = P(Ql- Compute the monopolist's prot under this twoblock pricing scheme. n Compute the deadweight loss under the twoblmk pricing scheme. and compare it. to the deadweight loss under singleprice monopoly. Should the regulatory agency allow the monopoly to increase the num of ks? Please give the reasons for your answer [maximum length: 50 words). U-ng your answers to (i) and {iii}, compute the following ratios: Qt QE-Qi T1