Assume that Gas & Minerals is the only copper mining firm in Chile. The national demand for copper in thousands of tonnes per month is: q^d(p) = 15 - p The total costs in millions of dollars are: c(q)...

Assume that Gas & Minerals is the only copper mining firm in Chile. The national demand for copper in thousands of tonnes per month is:

q^d(p) = 15 - p
The total costs in millions of dollars are: c(q) = 5q
(a) What would be the profit-maximising level of production for this firm? Determine the monopoly price and quantify the profits. Graph the demand, marginal revenue and marginal cost, identifying their values along with determining the social loss generated and identifying it in the graph above.

Assume now that due to a bad internal restructuring, the operations manager was fired and a professional with little mining experience was hired. The new manager does not know environmental protocol and mining waste (tailings) has gotten out of control and has been dumped into a river. This generated a negative externality on copper production. The estimated damage is US$5 million per 1,000 tonnes.
(b) Obtain the social marginal cost of this mining activity.
(c) What level of production will maximise the company's profits? Determine monopoly price and profit. Plot demand, marginal revenue, marginal cost (social and private) and possible social loss.