PS13+homework

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

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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
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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...
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