Suppose the market demand curve is p=1000−q and the market is regulated The

Question

Suppose the market demand curve is p=1000−q and the market is regulated.

The

regulator’s objective is to maximize social welfare. For each of the following three cost functions find the social welfare-maximizing market price and market output. Then using these values calculate the highest social welfare for each the three cost functions and compare your result. You have to explain your finding using economic intuition and diagrams. The three cost functions are

(i) c(q) = 200 + q ; (ii) c(q) = 200 + 2q ; (iii) c(q) = 300 + q

Economics