Question 1. (16 marks) You will compare the efficiency and distribution of the outcomes of competitive...

Transcribed Image Text:

Question 1. (16 marks) You will compare the efficiency and distribution of the outcomes of competitive and a monopolistic market organization. There are two types of household: Households of type A have the following inverse demand: Households of type B have the inverse demand: P(XA) = 20 - XA 6 P(XB) = 20-XB There are 10 identical firms with C(x) = = = -(x) 20 Consider a monopolist who can produce the same good at the following cost C(x) (x). 200 v) (2 marks) If the monopolist can charge each household type a different price for the same good, what would its profit expression be? vi) (3 marks) How many units X and xB would it sell to each sub-market? vii) (1 mark) How much profit does the monopolist earn? viii) (3 marks) Explain using a graph how we can tell the monopolist's supply is an inefficient allocation? Question 1. (16 marks) You will compare the efficiency and distribution of the outcomes of competitive and a monopolistic market organization. There are two types of household: Households of type A have the following inverse demand: Households of type B have the inverse demand: P(XA) = 20 - XA 6 P(XB) = 20-XB There are 10 identical firms with C(x) = = = -(x) 20 Consider a monopolist who can produce the same good at the following cost C(x) (x). 200 v) (2 marks) If the monopolist can charge each household type a different price for the same good, what would its profit expression be? vi) (3 marks) How many units X and xB would it sell to each sub-market? vii) (1 mark) How much profit does the monopolist earn? viii) (3 marks) Explain using a graph how we can tell the monopolist's supply is an inefficient allocation?