Can I please get help solving this problem? Thank You
Homework Answers
1.
To calculate allocatively efficient price, we have:
P = MC
100 - q = 20
q = 80
Price = 20
Quantity = 80
2.
To calculate profit maximizing price, we need:
Revenue = Pq = (100 - q)q
Equating it to MC, we get:
MR = MC
100 - 2q = 20
q = 40
Price = 100 - 40 = 60
Quantity = 40
3.
Efficiency loss (Deadweight loss) with higher price:
= 0.5(Profit maximizing price - MC)(Difference in quantity) = 0.5(60 - 20)(80 - 40) = 800.
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