Deadweight loss of monopoly for plastic hangers
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Consider a plastic hanger market. Suppose that the inverse demand for hangers is given by P=3-Q/16000
MC=1
Calculate the following (see attached).
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Solution Summary
Illustrates how to calculate the equilibrium price and quantity for perfect competition and monopoly and deadweight loss of monopoly.
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See the attached file for complete solution. The text here may not be copied exactly as some of the symbols / tables may not print. Thanks
a)
P=3-Q/16000
MC=1
For competitive market, the equilibrium price and quantity is achieved when
P=MC
So we have 3-Q/16000=1 ...
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