Ms. Moneynickel has a monopoly in oil refinement in the local market. The demand for Ms. Moneynickel's oil is: P = 75 - q. The relevant marginal revenue function is: MR(q) = 75 - 2q. Ms. Moneynickel's marginal cost function is: MC(q) = 0.5q. In the refinement of oil, Ms. Moneynickel emits pollution that has the marginal external cost function: MEC(q) = 31. What level of output will Ms. Moneynickel select to maximize profits? What is the marginal social cost of Ms. Moneynickel's profit maximizing output? What do consumers pay for Ms. Moneynickel's refined oil? Is this level of output efficient? Should more or less oil be refined to reach the optimum output level? Should the local government charge Ms. Moneynickel a pollution fee for each unit of oil she refines?

Question

Quizplus · Accepted Answer

The Answer of Ms. Moneynickel has a monopoly in oil refinement in the local market. The demand for Ms. Moneynickel's oil is: P = 75 - q. The relevant marginal revenue function is: MR(q) = 75 - 2q. Ms. Moneynickel's marginal cost function is: MC(q) = 0.5q. In the refinement of oil, Ms. Moneynickel emits pollution that has the marginal external cost function: MEC(q) = 31. What level of output will Ms. Moneynickel select to maximize profits? What is the marginal social cost of Ms. Moneynickel's profit maximizing output? What do consumers pay for Ms. Moneynickel's refined oil? Is this level of output efficient? Should more or less oil be refined to reach the optimum output level? Should the local government charge Ms. Moneynickel a pollution fee for each unit of oil she refines?

Ms Moneynickel Has a Monopoly in Oil Refinement in the Local