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

Monopolist''s profit-to-revenue ratio, "Take a monopolist with a constant a...

"Take a monopolist with a constant average cost. The higher is the elasticity of demand at the chosen monopoly price, the higher is the monopolist's profit-to-revenue ratio." Expla

Estimate the decline parameters and economic rate of return, 1. The figure ...

1. The figure below is historical production data from the Kuparuk River field. The OOIP is 5,332,979 Mstb and cumulative recovery through 12/31/2004 is 1,971,200,654 stb.

Demand pull inflation and cost-push inflation, Demand Pull Inflation and Co...

Demand Pull Inflation and Cost-Push Inflation: Demand Pull Inflation: It describes a sustained increase in the general price level that is caused by a permanent increase in n

Elasticity, Elasticity is a term broadly used in economics to signify the “...

Elasticity is a term broadly used in economics to signify the “responsiveness of one variable to changes in to another.” Types of Elasticity can be explained as follows: Th

Strategy to fight ntb and reorganisation of export councils, Reorganisation...

Reorganisation of Export Councils: India has a large number of exporpromotion councils, commodity boards and other similar agencies, butheir impact on India's foreign trade h

Factor markets, A firm in a perfectly competitive product market takes the ...

A firm in a perfectly competitive product market takes the price of the product as given. Similarly, a firm in a perfectly competitive factor market takes the price of the factor

Three factors by america palce at world economy leading edge, 3 factors by ...

3 factors by america palce at world economy leading edge 3 factors have taken pride of place in explanations of America's place at the world economy's leading edge in its level

Pricing ATM Machines, A bank in a medium-sized midwestern city, Firm X, cur...

A bank in a medium-sized midwestern city, Firm X, currently charges $1 per transaction at its ATMs. To determine whether to raise price, the bank managers experimented with a numbe

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