Recall the regulation model where legislators apply regulations to garner votes. Votes are a function
of producer utility (U R ) and consumer utility (UC ). The legislator’s vote/utility function is V = V(UR ,
U C ). If U R = R, and U C = K – R – L, where K is a constant and R and L are functions of the price.
Obviously, both U R and U C are affected by the eventual price (P) set by the legislator because both R and L
are affected by that price.
a. Suppose the demand equation is given by P = 100-0.5Q , and MC = $50. Write R as a function
of the price and find the price that maximizes producer utility.