Microeconomics – Externalities Question
the demand for gummy bears is given by Q = 200 – 100P and these confections can be produced at a constant marginal cost of $0.50.
a. how much will sweet tooth inc be willing to pay in bribes to obtain a monopoly concession from the government for gummy bear production?
b. do the bribes represent a welfare cost from rent seeking?
c. what is the welfare cost of this rent seeking activity?