What is the profit maximizing condition

Reference no: EM132199017

Question: The government decides to provide a subsidy for pollution reduction to firms.

(a) The government wishes to reduce pollution against the maximum pollution extent of Z-bar. The firm produces pollution Z(q) for each q units of output. If the government pays Dollars s per unit of pollution reduction, what is the total subsidy to the firm when it produces output q?

(b) Assuming the cost of producing q units of goods is C(q) write down the profits of the firm including the subsidy payment.

(d) What is the impact of subsidy on average cost of the firm?

(e) Show the new equilibrium price assuming free entry of firms.

(f) What is the impact on overall demand and supply of goods.

(g) Explain the impact on overall pollution reduction using subsidies compared with the use of Pigovian taxes. Illustrate using suitable graphs.

Reference no: EM132199017

Questions Cloud

Discuss why ppp should hold in the long run : Discuss why PPP should hold in the long run. Also, why is it that PPP often does not hold up empirically even over long periods of time.

Equilibrating mechanisms : Explain the interest parity condition - including equilibrating mechanisms.

How have we been using constrained optimization : How have we been using "constrained optimization" (provide the function/formula also)

Budget constraint and draw it on a graph : Write the equation for the budget constraint and draw it on a graph. Label everything correctly

What is the profit maximizing condition : The government wishes to reduce pollution against the maximum pollution extent of Z-bar. The firm produces pollution Z(q) for each q units of output.

Draw a straight line demand curve : Draw a straight line demand curve show where it is unit elastic, inelastic and elastic.

Evaluate risky decisions using prospect theory : Dwayne and Andre are quite certain that they evaluate risky decisions using Prospect Theory. They are told by a researcher that their decisions reflect.

Which the money supply grows faster than rgdp : As stated by Monetarists, what is the long-term result of continuing expansionary monetary policy in which the money supply grows faster than RGDP.

Real exchange rate tend towards one : Two countries trade freely. In the long-run, why will the real exchange rate tend towards one?

User Account

All Pages