Reference no: EM133131168
You are supplied with the following information for a Montreal based firm. Based on this answer the following questions:
P= 100-0.01Q
TC = 100,000 + 20Q
a) Draw a two part diagram and illustrate graphically on the top diagram the demand MR and MC curves and in the bottom one the TR and TC curves.
b) Determine the profit-maximising price (P) and output (Q), total revenues (TR) total cost (TC) and total profit.
c) Suppose that the firm's total cost rises to TC' = 130,000 + 20Q. Determine the new P, Q, TR, TC and ∏. Does the change in firm's fixed cost alter its pricing and output behaviour?
d) Suppose instead that the firm's total cost rise to TC = 100,000 + 40Q. Determine the new P, Q, TR, TC and ∏. Does the change in firm's variable cost alter its pricing and output behaviour?
e) Suppose instead that the government introduce a profit tax of Q = 50%. Determine the new P, Q, TR & TC and after tax ∏. Does the introduction of a corporate profit tax alter its pricing and output behaviour ? (use original values for TC)
f) Suppose instead that the government introduces an excise tax of q = $20 per unit. Determine the new P, Q, TR, TC and ∏. Does the introduction of an excise tac alter its pricing and output behaviour ? (Use original values for TC).
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