25 Jul WHAT IS THE MAGNITUDE OF THE DEAD WEIGHT LOSS?
Here is the question I am trying to figure out at this time and am having troubles understanding how Show more Here is the question I am trying to figure out at this time and am having troubles understanding how to figure out the questions being asked. The Question: Assume that product y is produced by a monopolist. Further assume that the monopolists single-variable-input production function is y = 2x^(1/ 2) and that there are no fixed costs. Finally assume that the monopolists demand curve for his/her output is given by p = 24 ? 2y. 1. (a) Find the monopolists VC function and then set up the output-side profit-maximization problem and find the optimal output assuming the factor (input) price is $8. (b) Continuing with the mathematical approach determine the price that the monopolist will set for his/her product. (c) Lastly how much profit will the monopolist make assuming he/she has no fixed costs? 2. Now (a) find and plot MR AR and MC on a common set of axes. Use a full page for your graph with a scale of 1 inch per unit of y (the horizontal axis) and inch per $2 (on the vertical $ p axis). (b) Identify on your graph the optimal output level and the price that will be charged. Do these agree with your findings in 1 (a) and (b) above? (c) Determine from your graph the CS and PS. Show calculations. What is another name for PS and does your numerical result agree with your finding in question 1(c)? (d) Identify the area on your graph that represents what economists call dead weight loss. What is the magnitude of the dead weight loss? Show calculations. Why is the dead weight loss important? Three or four sentences maximum. I thank you for your help and I hope that someone will be able to help me find the correct answers to the question as well as helping me understand how to get those answers. Show less
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