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

Define the price ceiling, Define the price ceiling A price ceiling is a h...

Define the price ceiling A price ceiling is a highest price that sellers can charge for a product.

Unemployment, Unemployment: Unemployment refers to a situation where p...

Unemployment: Unemployment refers to a situation where people who are willing and able to work do not find jobs at the existing wage rate.For a person to be referred to as une

Example of insurance - reducing risk, The Value of Title Insurance While Bu...

The Value of Title Insurance While Buying a House *  A Scenario: - Price of house is $200,000 - 5% chance that seller does not own house *  Risk neutral buyer would pa

Monopoly, b) Why is monopoly considered to be generally against public inte...

b) Why is monopoly considered to be generally against public interests, and what policy instruments can be used to regulate monopolies?

Explain about contingent valuation, Q. Explain about Contingent valuation? ...

Q. Explain about Contingent valuation? Evaluation of willingness to pay for a specified environmental resource or a change in the resource, through use of structured questionna

Black economy public policy interface, Black Economy Public Policy Interfac...

Black Economy Public Policy Interface: The above mode of functioning and expansion of the black economy became an important basis for policy disruption in India. The undergrou

Explain production and costs, The reason that an entrepreneur supposes the ...

The reason that an entrepreneur supposes the risk of starting a business is to earn profits.  The fundamental assumption in the theory of production is that a rational owner of a b

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