400ps1-11 - ECON 400 Winter 2011 PROBLEM SET I(for Monday...

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

View Full Document Right Arrow Icon
ECON 400 Hartman Winter 2011 PROBLEM SET I (for Monday, January 10) 1. (This is problem 8 in Chapter 1 of the text.) A monopolist faces the demand function x ab p  where x is the quantity sold, p is the price (to buyers), and a and b are given parameters. The monopolist's production costs are given by 2 Ck x where k is a given parameter. There is also a per unit tax on the monopolist's sales at the rate t . The monopolist's objective is the maximization of profit. a. What restrictions on the values of the parameters a , b , and k would you be inclined to assert, a priori ? b. Find the monopolist's output as a function of t , *( ) x xt . Confirm that *( )/ 0 dx t dt for the restricted values of a , b , and k from part a, i . e ., show that output decreases as the tax rate increases. c. What restrictions does the hypothesis of profit maximization place on the parameters a , b , and k ? How do these restrictions compare with those from part a?
Background image of page 1

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

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 2

400ps1-11 - ECON 400 Winter 2011 PROBLEM SET I(for Monday...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online