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Unformatted text preview: discovers a new production process that would lower its marginal cost by $1 per widget. Use a graph to show how much its producer surplus will increase if it adopts the new production process. 1 4. We know that for a competitively supplied good, the economic incidence of a tax is independent of the legal incidence. That is, a sales tax and an excise tax of equal magnitudes have exactly the same effects. Is the same thing true for a good supplied by a monopolist? Explain your answer. 5. Assume the demand for GMs Hummer H2 is the following: P = 100,000 500Q. The total cost of production is the following: TC = 2,000,000 + 300Q 2 . Calculate the profit-maximizing price (P) and output level (Q), and the level of profit enjoyed by the firm. 2...
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- Spring '12