A monopolist faces the inverse demand function of P = 25 – Q Also, this monopolist has the production of function of Q=

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A Monopolist Faces The Inverse Demand Function Of P 25 Q Also This Monopolist Has The Production Of Function Of Q 1 (91.22 KiB) Viewed 25 times

A monopolist faces the inverse demand function of P = 25 – Q Also, this monopolist has the production of function of Q= K + , = where Q is output, K is capital, and L is labour. This monopolist faces the capital cost of r =: wage of w = 5. It also incurs the fixed cost of F = 12. The monopolist is currently unregulated. 2.1 Derive the total cost function, and calculate the marginal cost. Then, draw the figure demand function and marginal cost. (Grading Weight: 6 2.2 Derive the profit function (Q). (Grading Weight: The profit hill is depicted below. 90 Profit Function 80 70 60 50 Profit 40 30 20 10 0 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25
2.3 Calculate the monopoly price (PM) and quantity (QM). [Grading Weight: 0.25%] 2.4 Under this unregulated monopoly, calculate the consumer surplus (CSM), profit (TM), and total surplus (TSM). (Grading Weight: 6.25%] CONTINUED OVERLEAF To regulate this monopoly market. a regulator introduces a Rate of Return (RoR) regulation with the fair rate of return f. The profit function and constraint line are plotted below. The intersections points of profit function and constraint line are (Q.T) = (1,7) and (Q.T) = (12,84). 90 Profit Function Carstraint une ВО 70 BO Profit 30 20 10 0 1 2 3 4 5 6 7 8 9 101112 13 14 15 18 17 18 19 20 21 22 23 24 25 Quantity 2.5 Concisely describe the Rate of Return (RoR) regulation. Also, what f did the regulator choose? Calculate. (Grading Weight: 6.25%] 2.6 Derive the regulated price (ProR), quantity (Ror), capital (K RoR), labour (LRor), consumer surplus (CSRoR), profit (Tror), and total surplus (TSRoR). Does the over-capitalisation phe- nomenon happen under this regulatory environment? [Grading Weight: 6.25%] 2.7 Compared to the unregulated monopoly, how much of an increase in total surplus does this RoR regulation create? Grading Weight: 12.5%)