1. Suppose you are given the following information about a firm?s cost function and market...
Question:
1. Suppose you are given the following information about a firm?s cost function and market demands for good X and Y.
a. Cost: C=1800+20X+20Y
b. Demands: X=100-Px and Y=120-2Py
2. Show that the Ramsey Prices for this example are equal to Px=40 and Py=30.
Ramsey price
Ramsey prices refer to those prices which are set to maximize the social welfare. These prices are set for the goods that have inelastic demand. It is set by charging a higher mark-up component. Generally, a monopoly charges the Ramsey prices.
Answer and Explanation: 1
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View this answerThe marginal cost for X and Y is:
{eq}\begin{align*} C &= 1800 + 20X + 20Y\\ M{C_X} &= \dfrac{{\partial C}}{{\partial X}}\\ &= 20\\ M{C_Y} &=...
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Natural Monopoly in Economics: Definition & Examples
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Chapter 3 / Lesson 13
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Explore natural monopolies. Learn the definition of natural monopoly and understand how it functions. See characteristics of natural monopolies with examples.
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