tutorial_9 - ECOS 2001 Tutorial 9 1. A monopolist has an...

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1 ECOS 2001 Tutorial 9 1. A monopolist has an inverse demand curve given by p ( y ) =20 y and a cost curve given by c ( y ) = y 2 (a) What will be its profit-maximizing level of output? (b) Suppose the government decides to put a tax on this monopolist so that for each unit it sells it has to pay to the government $2. What will be its output under this form of taxation? (c) Suppose now that the government puts a lump sum tax of $10 on the profits of the monopolist. What will be its output? 2. In 1990, the town of Ham Harbour had a more-or-less free market in taxi services. Any respectable firm could provide taxi service as long as the drivers and cabs satisfied certain safety standards. Let us suppose that the constant marginal cost per trip of a taxi ride is $5 and the average taxi has a capacity of 20 trips per day. Let the demand function for taxi rides be given by D(p) = 1200 – 20p, where demand is measured in rides per day, and price is measured in dollars. Assume that the industry is perfectly competitive. (a) What is the competitive equilibrium price per ride? What is the equilibrium number of rides per day? How many taxi cabs will there be in equilibrium?
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This note was uploaded on 02/16/2010 for the course ECOS 2001 taught by Professor None during the One '09 term at University of Sydney.

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tutorial_9 - ECOS 2001 Tutorial 9 1. A monopolist has an...

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