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(Solved): (50 pts) In a monopolized industry, the demand is given by q=D(p)=p^(-\epsi ), where \epsi >1. Ma ...



(50 pts) In a monopolized industry, the demand is given by

q=D(p)=p^(-\epsi )

, where

\epsi >1

. Marginal cost is constant and equal to

c

. (1) Derive, the demand elasticity. (2) Solve the monopolist's problem by finding the price that maximizes the profit. (3) Derive the socially optimal price. (4) Write the total welfare,

W^(**)

with socially optimal price in terms of

c

and

\epsi

only. (5) Compute the welfare loss under monopoly.



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