Please find my question attached

1. (a) Carefully explain the idea. behind yardstick competition. (b) Consider a hOSpital that faces inverse demand: 9' 19(9) = 40 10 where q is quantity and p is unit price. The hOSpital has no xed cost and marginal cost is Cu 2 22. Suppose that the hospital can lower its marginal cost according to: R(c) : 40 (c co)2 where c is the new marginal cost. A yardstick regulator assigns the hospital the following lump-sum payment and yardstick price: T = 300 39 = 20 What marginal cost c will the hospital choose? Calculate the prot maximizing value of q, the maximized prot 1r, and the associated consumer surplus 05' under regulation