The Metro Electric Company produces and distributes electricity to residential customers in the metropolitan area. This monopoly firm is regulated, as are other investor owned electric companies. The company faces the following demand and marginal revenue functions:
P = 0.04 - 0.01Q
MR = 0.04 - 0.02Q
Its marginal cost function is:
MC = 0.005 + 0.0075Q,
where Q is in millions of kilowatt hours and P is in dollars per kilowatt hour. Find the deadweight loss that would result if this company were allowed to operate as a profit maximizing firm, assuming that under regulation.

Question

The Metro Electric Company produces and distributes electricity to residential customers in the metropolitan area. This monopoly firm is regulated, as are other investor owned electric companies. The company faces the following demand and marginal revenue functions:
P = 0.04 - 0.01Q
MR = 0.04 - 0.02Q
Its marginal cost function is:
MC = 0.005 + 0.0075Q,
where Q is in millions of kilowatt hours and P is in dollars per kilowatt hour. Find the deadweight loss that would result if this company were allowed to operate as a profit maximizing firm, assuming that  under regulation.

Quizplus · Accepted Answer

The Answer of The Metro Electric Company produces and distributes electricity to residential customers in the metropolitan area. This monopoly firm is regulated, as are other investor owned electric companies. The company faces the following demand and marginal revenue functions:
P = 0.04 - 0.01Q
MR = 0.04 - 0.02Q
Its marginal cost function is:
MC = 0.005 + 0.0075Q,
where Q is in millions of kilowatt hours and P is in dollars per kilowatt hour. Find the deadweight loss that would result if this company were allowed to operate as a profit maximizing firm, assuming that  under regulation.

The Metro Electric Company Produces and Distributes Electricity to Residential