Milwaukee Utilities has a complete monopoly over the generation and transmission of energy. The following information on this company is given as follows:
Demand = 1000 - Q
Marginal cost = 500
Where Q is measured in megawatts and prices and costs are measured in dollars.
How much energy would be sold and at what price if
A. The firm sets price as a monopoly?
B. What is the firm’s profits at the monopoly price determine in part a?
C. Now suppose the industry (firm) behaves perfectly competitively, how much energy would be sold and at what price?
D. What is the firm’s profits at the monopoly price and at the competitive price?
E. Now suppose the firm engages in perfect (3rd degree) price discrimination. What is the firm’s profit?
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