Exercise 3 Twoperiod monopoly problem Consider a monopolist that produces for two periods. The demand curves in both periods are qt : 1 apt for t : 1, 2. The marginal costs are e in the rst and and C * Aql in the second period. Here7 A is a small and positive number. There is a discount factor of 6 between the periods. 1. Explain briey how the rnouopolist's problem changes compared to a sit- uation where the. marginal cost is c in both periods. 2. Find the quantities ql and 412 that the monopolist chooses in the two periods. Hint: Start by solving the Inonopolist's problem in the second period and then continue to the rst period. 3. Evaluate the effect of A and discuss your result. Exercise 4 [Market structure for rating agencies In the recent nancial crisis, rating agencies have become a focus of attention. The market has traditionally been dominated by a few big agencies, currently Standard 3.; Poor. lVIoody's and Fitch. In 2006, the Securities and Exchange Commission (SEC) introduced measures to speed up the appoval process for rating agencies with the aim to increase competition. However7 in response to the nancial crisis. the Fed introduced lending programmes for whichithis is what it said initiallyiit accepts only collateral that has been appraised by one of the big three. Discuss the likely consequences of such a decision on market structure