Microeconomic monopoly, Microeconomics

Assignment Help:

A monopolist faces the following demand function for its product: Q = 45 - 5P

The fixed costs of the monopolist are $12 and the variable costs are $5 per unit.
a) What are the profit-maximizing price and quantity? What will be the profits at these price and output levels?

b) If the government imposes an annual tax on the firm of $10, what will be the profit-maximizing price, output, and profits? Who bears the burden of the tax? Why? (Distinguish short run and long run).

c) If, instead of the annual tax, the government imposes an excise tax of 50 cents per unit of output sold, what is the impact on the profit-maximizing price, output, and profits? Who bears the burden of tax? Why?

c) If, instead of the annual tax, the government imposes a ceiling $6 on the price of the firm's product, what output will the firm produce, and what will be the total profits? What is the impact of the price ceiling on 'market efficiency'? (Hint: Compare the quantity produced under monopoly without price ceiling with quantity produced with price ceiling, and with quantity that would be produced by a perfectly-competitive firm).

e) Calculate the consumer surplus under each of the following alternatives:
* Monopoly without tax and without price ceiling
* Monopoly with tax of 50 cents per unit
* Monopoly without tax, but with price ceiling of $6
* Perfectly competitive inudstry

Illustrate your answers with diagrams whenever appropriate.


Related Discussions:- Microeconomic monopoly

Advantages of division of labour, Advantages of Division of labour: Di...

Advantages of Division of labour: Division of labour has advantages including the following: Development of Greater Skill by the Worker In division of labour, each

Rational self-interest, Discuss the impact of rational self-interest on eac...

Discuss the impact of rational self-interest on each of the following decisions

Atoms and molecules, who proposed the law of chemical combinations?

who proposed the law of chemical combinations?

Estimating Industry Demand for Fresh Market Carrots, this is a project I ne...

this is a project I need help answering the questions

State intervention in an economy, Problem 1: The last half-century has ...

Problem 1: The last half-century has witnessed major changes in the role that governments of developing countries have played, especially in terms of public spending. (a) Ex

Consumer behaviour, compare and contrast between cordinal and ordinal appr...

compare and contrast between cordinal and ordinal approaches

Definition of labour force, Q. Definition of labour force? Labour Force...

Q. Definition of labour force? Labour Force:Total population of working-age people who are willing and able to work and who thus have ‘entered' labour market. Labour force incl

Explain consumer sovereignty, Explain consumer sovereignty and why it might...

Explain consumer sovereignty and why it might not be that extensive in real life. Explanation of consumer sovereignty Use of S/D model to show how changes in consumption pat

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd