PS13+homework - T What is the deadweight loss(Hint Follow...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Intermediate Microeconomics, 2010 Problem Set 13: Homework Due Wed/Thurs, Feb. 24/25 1. Taxes. Consider the following quasilinear economy: U ( m;q ) = m + 54 p q c ( q ) = 1 2 q 2 and Y = 100. Recall that we found the competitive allocation to be [ q ± ;q ± ± ;m ± ] = [9 ; 9 ; 81 2 ; 19] and p ± = 10 on a previous problem set. Now we will consider the con- sequences of a tax: What happens with a tax t = 9 : 5 which has to paid by the ±rm? What is the competitive allocation with a tax, x t = [ q t ;q t t ;m t ]. (Hint: q t is going to be 3, 4, 5 or 6. Try each one.) What is the tax revenue
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: T ? What is the deadweight loss? (Hint: Follow the steps used in the exercise.) 2. Monopoly . Consider a monopolist with cost c ( q ) = 5 q 2 and a consumer with U ( m;q ) = m + 100 q ± 5 q 2 with income Y = 100. (a) Find the competitive allocation x ± . (Hint: Treat the situation as if the ±rm were a competitive ±rm.) (b) Find the monopolistic allocation x m . (c) What is the deadweight loss? 1...
View Full Document

{[ snackBarMessage ]}

Ask a homework question - tutors are online