A monopoly electricity producer serves two types of customers, business (B) and household (H). The demand function of bu

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A Monopoly Electricity Producer Serves Two Types Of Customers Business B And Household H The Demand Function Of Bu 1 (150.85 KiB) Viewed 36 times

A monopoly electricity producer serves two types of customers, business (B) and household (H). The demand function of business and household markets are given by QB = 100 – PB and QH = 120-2PH. The monopolist has the marginal cost MC = 20, and it also has the fixed cost F = 1800. So far, the monopolist is unregulated. 1.1 Plot the inverse demand functions and marginal cost for each market. Calculate the monopoly (M) prices (PX and PH) and quantities (Q and QM). [Grading Weight: 6.25%] 1.2 Calculating the monopoly profit (TM) and consumer surplus for each type of consumers (CSX and CSH), as well as the total surplus (TSM). [Grading Weight: 6.25%] 1.3 Briefly state the definition of first-best outcome, then find the first-best (FB) outcome. Calculate the first best outcome profit (7FB), consumer surpluses (CSEB and CSFB), and total surplus (TSFB). [Grading Weight: 6.25%] The regulator now considers setting Ramsey Prices. 1.4 Concisely describe Ramsey prices and a second-best outcome. [Grading Weight: 6.25%] 1.5 State the quantity reduction rule, which is the necessary condition for Ramsey prices, and eco- nomic insights. [Grading Weight: 6.25%] 1.6 By using the quantity reduction rule and zero-profit condition, derive the Ramsey (R) quantities for the business and household market (Q) and Qll), as well as Ramsey prices for both markets (PB and PĂ). Briefly explain why PB is higher than P. [Grading Weight: 6.25%] 1.7 At the Ramsey prices, calculate the profit (TR), consumer surpluses (CS1 and CSB), and total surplus (TSR). Compared to the unregulated monopoly situation, how large is the increase in total surplus? Gradina Weiaht. 19 50%