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hw6 - 2(15 points Suppose market demand is given by P = 120...

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ECO 300 Homework 6 Due Thursday 04/28 1. (15 points) A monopolist faces an inverse market demand P = 300 – Q. Its total cost is given by TC = 1200 + 0.5 Q 2 and its marginal cost is given by MC = Q. The monopolist’s marginal revenue is given by MR = 300 – 2Q. b. How much is the profit-maximizing output? c. Is the monopolist making any profit? How much? d. How much is the deadweight loss compared to the perfectly competitive outcome (where P = MC)?
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Unformatted text preview: 2. (15 points) Suppose market demand is given by P = 120 – 2Q and market supply is given by P = 2Q + 20. a. What is the market equilibrium price and quantity? b. Now suppose the government provides an excise tax of $10 per unit. What will the new equilibrium quantity be? What price will the buyer pay? What price will the seller receive? c. How much is the deadweight loss due to the tax?...
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