1 The Colorado College Department of Economics and Business Block 7 Econ 207 HW 9. 1. The handmade snuffbox industry is composed of 100 identical firms, each having short-run total costs given by: STC = .5q 2 +10q + 5 where q is the quantity of snuffboxes per day. (a) Obtain the short-run marginal cost curve for the firm. What is the short-run supply curve for each snuffbox firm? What is the short-run supply curve for the market as a whole? (b) Suppose the demand for total snuffbox produced is given by Q = 1100 – 50P What is the equilibrium in the marketplace? What is each firm’s total short-run profit? The overall industry profit? (c) Calculate the consumer surplus, producer surplus and total surplus. (3+3+4 = 10 points) 2. Suppose that the government imposed a tax on consumers of $3 on snuffboxes in the industry described for question 1 above. (a) How would the tax change the market equilibrium price? (2 points) (b) What is the total tax revenue? How would this tax revenue be shared between
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