Reference no: EM132357307

Los Gatos Energy is a monopoly company providing electricity and power for the Western Argentina, in South America. The company faces the following demand curve: P = $600 - 15Q, where Q equals the production sold in one single average day. Its marginal cost curve is MC = $150 per day. Assuming the company has no fixed costs, answer the following questions.

a. How much will the firm produce?

b. How much will it charge?

c. Can you determine its profit per day? (Hint: you can; state how much it is.)

d. Suppose a tax of $1,500 per day is imposed on the firm. How will this affect its price?

e. How would the $1,500 per day tax its output per day?

f. How would the $1,500 per day tax affect its profit per day?

g. Now suppose a tax of $150 per unit is imposed. How will this affect the firm's price?

h. How would a $150 per unit tax affect the firm's profit maximizing output per day?

i. How would the $150 per unit tax affect the firms profit per day?