Changes

8. Suppose Anthony owns a company having marginal costs of $5 for all his units.  If he sells only one, then he reaps $11; selling two fetches a price of $10 piece; selling 3 attains a price of $9; selling four reaps $8; Q=5 would have P=$7; Q=6 has P=$6, etc.  A competitive firm would have the same cost and demand numbers.  What does Anthony sell at, and what is the social cost of his monopoly?

8. Suppose Anthony owns a company having marginal costs of $5 for all his units.  If he sells only one, then he reaps $11; selling two fetches a price of $10 piece; selling 3 attains a price of $9; selling four reaps $8; Q=5 would have P=$7; Q=6 has P=$6, etc.  A competitive firm would have the same cost and demand numbers.  What does Anthony sell at, and what is the social cost of his monopoly?

'''If Anthony's company has monopoly and a marginal cost of $5 per widget, then using the described demand curve, his company should sell three widgets at $9 apiece or 4 widgets at $8 apiece. Either approach will give Anthony's company a profit of $12.

'''If Anthony's company has monopoly and a marginal cost of $5 per widget, then using the described demand curve, his company should sell three widgets at $9 apiece or 4 widgets at $8 apiece. Either approach will give Anthony's company a profit of $12.'''

If Anthony sells only three widgets at $9, then that is four less than what a competitive market would sell. The social cost is the sum of (P-MC) over each of the withheld units, noting that the social cost for each withheld unit is different because the unit goes unsold at a different P.  

'''If Anthony sells only three widgets at $9, then that is four less than what a competitive market would sell. The social cost is the sum of (P-MC) over each of the withheld units, noting that the social cost for each withheld unit is different because the unit goes unsold at a different P.'''

We assume that society would have purchased the unit at slightly less than the higher price, such $6 minus an infinitesimal amount. When the price went from $5 to $6, one unit went unsold and the loss to society was '''almost''' (P-MC=$6-$5=$1).  Likewise, another unit went unsold at $7 (P-MC=$2), another unit went unsold at $8 and another unit went unsold at $9. That total social cost is '''almost''' $1 + $2 + $3 + $4 = $10.  

'''We assume that society would have purchased the unit at slightly less than the higher price, such $6 minus an infinitesimal amount. When the price went from $5 to $6, one unit went unsold and the loss to society was almost (P-MC=$6-$5=$1).  Likewise, another unit went unsold at $7 (P-MC=$2), another unit went unsold at $8 and another unit went unsold at $9. That total social cost is '''almost''' $1 + $2 + $3 + $4 = $10.'''

If instead Anthony sold 4 units at $8, then the social cost is '''almost''' $1 + $2 + $3 = $6.  The "almost" is so close to the number that we drop the "almost" and simply provide the number as the estimated social cost.'''

'''If instead Anthony sold 4 units at $8, then the social cost is almost $1 + $2 + $3 = $6.  The "almost" is so close to the number that we drop the "almost" and simply provide the number as the estimated social cost.'''

Honors 9. Estimates are not very accurate about homeschooling, but some guess that 1 out of every 25 students is homeschooled.  At what level or fraction would homeschooling end the public school monopoly?  Discuss.

Honors 9. Estimates are not very accurate about homeschooling, but some guess that 1 out of every 25 students is homeschooled.  At what level or fraction would homeschooling end the public school monopoly?  Discuss.