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(Solved): 1.22 A monopolist faces linear demand p=\alpha -\beta q and has cost C=c q+F, where all parameters ...



1.22 A monopolist faces linear demand p=\alpha -\beta q and has cost C=c q+F, where all parameters are positive, \alpha >c, and (\alpha -c)^2>4 \beta F. (a) Solve for the monopolist's output, price, and profits. (b) Calculate the deadweight loss and show that it is positive. (c) If the government requires this firm to set the price that maximises the sum of consumer and producer surplus, and to serve all buyers at that price, what is the price the firm must charge? Show that the firm's profits are negative under this regulation, so that this form of regulation is not sustainable in the long run.



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