{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Quiz 20 Monopoly2

# Quiz 20 Monopoly2 - t per unit Write down the new cost...

This preview shows pages 1–2. Sign up to view the full content.

Shomu Banerjee ECON 201 MONOPOLY WITH TAX QUIZ A monopolist producer faces the (inverse) demand curve given by P = a - Q , where P is the price charged and Q is the quantity demanded. The total cost of producing the good is C ( Q ) = cQ ; the marginal cost is MC = c . (a) Find the price and quantity P * and Q * that maximize the monopolist’s profit in terms of the parameters a and c . (b) Suppose the government decides to tax the monopolist's output at a rate of \$

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: t per unit. Write down the new cost function for the monopoly and find the new profit-maximizing price and output combination, P ** and Q **, in terms of the parameters a , c and t . (c) How much of the \$ t per-unit tax was the monopolist able to pass on to consumers in terms of a higher per-unit price? ( Hint : Take the derivative of the new price P ** with respect to the tax t .)...
View Full Document

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern