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This my homework answer all the questions correctly and all should be handwritten. 2. Consider a monopolist facing the demand curve p = 90 29:

This my homework answer all the questions correctly and all should be handwritten.

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2. Consider a monopolist facing the demand curve p = 90 29: with oost function C(q} = 0.25912. (a) Find the prot maximizing quantity gm and prioe pm. What are the monopo- list's prots? (b) What is the value of the rm's mark-up (also called the Lerner index) at gm? ((3) Find the eicient quantity and draw a graph depicting the deadweight loss under monopoly. (d) What is the consumers' surplus under monopoly. (e) Suppose the government offers the monopolist a subsidy of $3 for each unit sold. Find the value of s that induces the monopolist to sell the eicient quantity. What is the total subsidy received by the monopolist? (f) Suppose the government olfers a lumpsum subsidy instead of the perunit subsidy. The lump-sum subsidy is exactly equal to the total subsidy that you found in part (e) above. What is the quantity sold by the monopolist under this lump-sum subsidy? 3. Duopoly Competition Now consider a market in which demand is 0(1)) = 1 p. There are two rms. a. Suppose both rms have total cost functions given by C(Q) = M), where k E (0,1). Derive the equilibrium price, quantity and prot levels under Cournot competition and under Bertrand competition. b. Now suppose that "rm 1" and "rm 2" have different cost functions. Firm 1's cost function is 31(0) = 1:10, and rm 2's cost function is (32(0) = sz, where 0

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