Suppose Icecream company has gained exclusive rights to sell Icecream in State College. The demand for Icecream is Q = 3000 − 60P. The total cost of producing Icecream is C(Q) = 6Q for Q orders of the drug.
A. What is the marginal cost function for Icecream?
B. Write down the monopolist’s maximization problem, assume the monopolist chooses how many Icrecream to produce.
C. How many units should ICECREAM in State College?
D. What is the price at this level of output?
E. Is this outcome efficient? If so, why? If not, what is the efficient level of output?
F. What is the Lerner Index for this product? What about the HHI?
G. Suppose the demand for Icecream was instead given by Qd = 3000 − 3P. How would the Lerner index change? The HHI? Would this lead to a more or less efficient outcome? Explain.