In using regression analysis to estimate demand, which of the ...

[lak]

In using regression analysis to estimate demand, which of the following problems is most directly a result of insufficient data?
 
  A) the identification problem
  B) the problem of a low R2
  C) the problem of high standard errors
  D) the problem of insignificant F-statistics

Question 2

Consider a monopolist with linear (inverse) demand p = a - bQ and constant average and marginal cost, c. Derive the monopolist's profit and the deadweight loss generated.
 
  Show that in such cases of linear demand and constant average and marginal cost, the deadweight loss is 50 of the monopolist's profits.

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Answer to Question 1

A

Answer to Question 2

Profit = (a - bQ)Q - cQ
dProfit/dQ = a - 2bQ - c = 0
Q = (a - c)/2b
p = (a + c)/2
Profit = (a - c)2/4b
DWL = (a - c)2/8b