Quantity effect of a specific tax

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Reference no: EM13831862

Quantity effect of a specific tax

A regulator plans to impose a specific tax on a previously unregulated monopolist. Before imposing the tax, they want to know what the change in quantity produced will be from such a tax. The proposed specific tax is τ = 10 and the following are the inverse demand and total cost functions:

P(Q) = 100 − (1/8)Q

C(Q) = 20 + 10Q + (1/8)Q²

Find the change in quantity from a $10 increase in the tax.

Reference no: EM13831862

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