If cost function is C=10+2q+q^2, price is p=10. The optimal quantity produced at p=10 is q=4. Now suppose a tax of \$2 per unit is levied on a firm.
View the step-by-step solution to:

Question

# If cost function is C=10+2q+q^2, price is p=10. The optimal quantity produced at p=10 is q=4. Now suppose a tax of

\$2 per unit is levied on a firm.What is the post-tax optimal quantity produced in the short run (price p=10 remains same)? And what is the change in profits after a \$2 per unit tax is assessed on the firm? (Provide the difference between post-tax and pre-tax values. Use positive number for an increase and negative number for a decrease.)

### Why Join Course Hero?

Course Hero has all the homework and study help you need to succeed! We’ve got course-specific notes, study guides, and practice tests along with expert tutors.

• ### -

Study Documents

Find the best study resources around, tagged to your specific courses. Share your own to gain free Course Hero access.

Browse Documents