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Suppose Emily is the city planner in Jasper The city is considering a proposal to award an exclusive contract to Green In a landscape developer Emily has discovered that one of economist

Suppose Emily is the city planner in Jasper. The city is considering a proposal to award an exclusive contract to Green Inc., a landscape developer. Emily has discovered that one of economist planners hired a year before has generated the demand, marginal revenue, total cost, and marginal cost functions given below: P = 28 – 0.001Q MR = 28 – 0.002Q TC = 120,000 + 0.00065Q2 MC = 0.0013Q, Q = the number of contracts and P = the price per feet. Emily knows relatively little about economics and has hired you to answer the following questions. (a) What price and quantity would be expected if the firm is allowed to operate completely unregulated? (b) Emily has asked you to recommend a price and quantity that would be socially efficient. Recommend a price and quantity using economic theory to justify your answer. (c) Compare the economic efficiency implications of (a) and (b) above. Your answer need not include numerical calculations, but should include relevant diagrams to demonstrate deadweight loss.

Jun 08 2020 View more View Less

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