Compute the resulting equilibrium price quantity combination

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Reference no: EM1344199

Q. (i) A monopolist faces the subsequent demand also total cost functions: Q= 65 - 1/2P TC= Q(to the 2nd power) + 10Q + 50

(a) Compute the profit maximizing o/p also price of the monopolist. Compute the resulting profit.

(b) Assume the government imposes an excise tax of $30 on the production also trade of the product. Compute the resulting optimal profit maximizing o/p also price for the monopolist. Also Conclude the level of profit.

(c) If the government's objective is to generate the maximum possible tax revenue from the monopolist, illustrate what excise tax rate should the government impose on the monopolist? Compute the resulting optimal o/p also price of the monopolist as well as government's tax revenue.

(ii) Two Industries produce differentiated products also set prices to maximize their person profits. Demand functions for the Industries are given by

Q1 = 64 - 4P1 + 2P2
Q2 = 50 - 5P2 + P1

where P1, P2, Q1, Q2, refer to prices also o/ps of Industries 1 also 2 respectively. Industry 1's marginal cost is $5 while industry 2's marginal cost is $4. Every industry has a fixed cost of $50. Assuming which the two Industries decide on prices independently also simultaneously, Compute the best response function of every industry in terms of prices. Compute the resulting equilibrium price quantity combination for every industry. Illustrate your answer with a suitable graph. Also Compute optimal profits of every industry.

Reference no: EM1344199

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