A monopolist produces a product whose demand price and production costs vary with quality s and...

 

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A monopolist produces a product whose demand price and production costs vary with quality s and quantity Q according to P = s(1 - Q) C = s²Q a) Calculate the price and quality levels that a monopolist would choose, and the corresponding quantity sold. b) Derive the consumers' surplus for any combination {s, Q}. c) The social planner does care for both consumers and monopolist (consumers' plus producers' surplus). Find the optimum quantity and quality. d) In which case (monopoly or social planner) the consumers' surplus is higher? A monopolist produces a product whose demand price and production costs vary with quality s and quantity Q according to P = s(1 - Q) C = s²Q a) Calculate the price and quality levels that a monopolist would choose, and the corresponding quantity sold. b) Derive the consumers' surplus for any combination {s, Q}. c) The social planner does care for both consumers and monopolist (consumers' plus producers' surplus). Find the optimum quantity and quality. d) In which case (monopoly or social planner) the consumers' surplus is higher?

Answer rating: 100% (QA)

a To determine the price and quality levels chosen by the monopolist we need to maximize the monopolists profit The monopolists profit is given by the ... View the full answer