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Homework - Marginal Cost and Monopoly Pricing Assume a single good, and utility to consumers, U(y) = 20 ln (y +1) where y is quantity
Homework - Marginal Cost and Monopoly Pricing Assume a single good, and utility to consumers, U(y) = 20 ln (y +1) where y is quantity of good Also assume that the cost to produce y is C(y) = y2 + 2y + 6 (i) Derive the inverse demand function p(y) (ii) For Marginal Cost pricing, obtain the quantity produced (and consumed), yMc , and the price pMc (iii) For Monopolies 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 may generically be called Dead Weight Loss, denoted by DWL)
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