Question

a-d

3) There are 1,000 identical perfectly competitive real-estate fimms selling office space in Syracuse, NY. The Marginal Cost of producing each square foot of space is constant and equal to $20. There are no fixed costs of production. So the firm's short-run and long-run cost function is c(q) = 200. The market demand is Q = 10,000 - 250p. a) What is the equilibrium price and quantity of office space in the real estate market in the short-run? How much does each firm sell at this equilibrium? b) What is the profit of each firm? What is the total profit of all 1,000 firms? c) What is the consumer surplus d) Calculate the value of total surplus at the market equilibrium? Suppose a monopolist decides to buy out all 1,000 firms at once and monopolize the real estate market in Syracuse. Assume he successfully buys everyone's firm and that there is no cost advantage associated with being a monopolist. Hence the cost function for the monopolist is (Q) = 200. e) Derive the Marginal Revenue function from market demand. 1) What is the profit-maximizing output and price? What are the profits to the monopolist? 9) What is consumer surplus? How much consumer surplus is lost due to monopolization? h) What is the Total Surplus at the monopoly price? i) What is the dead weight loss due to this monopolization?

Answer 1

Market Demandi a=10,000-250p. 250p = 10,000 -Q p= 10,ooo - co ( 'tirms nipply & Mc= 20. ap=20. Because the a me is constant. This imply that we had there will be infinite Supply @ this price P=20. Equim: Demand = Supply. a 100vo-- 20. a OU 700 . 10000-0= 250 20= 5000 Ta e- 5000 Equilibrum Price I pa=20] 5000= 1000 q where individas output a qe soon a s - Each form produce Sunité . rooo (b) prefit of frem ti П Е Р + C(4) = 2005 - 2005 Total profit ori - 0 consumer surpluse (penax pay at pmax obtained by putting a=0 prors 10,0v2, 40 le 0=o in deman z

Do Consum surplus (es) = 1 * (40-201² == *20.xsovo les = 50,000 Ts=cst profit TS = 50,000 4 o- ĪTS=50,000 S lds