Suppose a perfectly competitive industry can produce widgets at a constant marginal cost of $10 per unit. Monopolized marginal costs rise to $12 per unit because $2 per unit must be paid to lobbyists...

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Suppose a perfectly competitive industry can produce widgets at a constant marginal cost of $10 per unit. Monopolized marginal costs rise to $12 per unit because $2 per unit must be paid to lobbyists to retain the widget producers’ favored position. Suppose the market demand for widgets is given by

Q _D= 1,000 - 50P.

a. Calculate the perfectly competitive and monopoly outputs and prices.

b. Calculate the total loss of consumer surplus from monopolization of widget production.

c. Graph your results and explain how they differ from the usual analysis.

Answered Same Day Dec 24, 2021

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David answered on Dec 24 2021

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Suppose a perfectly competitive industry can produce widgets at a constant marginal cost of $10 per unit. Monopolized marginal costs rise to $12 per unit because $2 per unit must be paid to lobbyists...

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