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Given the demand function Price, Social welfare, marginal opportunity cost.

A business faces equal time periods of peak and off-peak demand for its service as given by the following:

P1 = 25 - .02Q1

P2 = 15 - .01Q2

The business faces marginal operation prices of $1.00 per unit. The business also faces a ability constraint like it must incur a $2.50 per-unit cost to expand capacity.

Between your answers to parts b and c, which prices/capacity are best applied from a social welfare perspective? Why?

 

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M918419

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