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Question: consider a monopolist which produces two products x y and...

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Consider a monopolist which produces two products (x, y) and has cost function c(x,y) - 11y where c(r,06+ Let p and Py denote the prices of x and y respectively. Suppose that the demands are pa() 6-4 and 6 for Py 3 y(Py) 0 for Py >3 Find the prices an unregulated monopoly will charge. Hint: Plot y(p). Does the monopolist produce y0 Describe the first best regulatory scheme. Hint: require marginal cost pricing for good z and figure out which good y prices marimize welfare.

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