Find the comparative statics for an increase

Assignment Help Microeconomics
Reference no: EM13175955

In this question you will examine the effect of a sales tax on a monopolist's profit maximizing price and rate of output. Assume that the monopolist faces a linear inverse demand curve given by p(y)=a-by, where a>0 and b>0, and a quadratic total cost function c(.) given by c(y)=1/2ky^2, where k>0. The monopolist is also assumed to pay a fraction s, 0<s<1, of its total sales revenue in taxes to the government.

a)Set up the monopolists profit maximization problem in the presence of the sales tax, and find the profit maximing rate of outuput say y=y^s(a,b,k,s)

b)Find the monopolists optimal price, say p=p^s(a,b,k,s).

c) Find the comparative statics for an increase in the sales tax, namely y^s/s and p^s/s , and provide an economic interpretation of them.

d)What is the economic interpretation of an increase in the parameter a? You might want to plot the demand function to help with your interpretation.

Reference no: EM13175955

Questions Cloud

How many grams of ammonia are formed : When 79.272 cg of nitrogen gas is reacted with 79.272 cg of hydrogen gas, how many grams of ammonia are formed?
List these compounds in order of increasing molar solubility : List these compounds in order of increasing molar solubility in water show your calculations.
State and demonstrate that an excess of hydrogen peroxide : demonstrate that an excess of hydrogen peroxide was used in the oxidation step of Fe(II) to Fe(III)
Calculate the equilibrium concentration of carbon monoxide : If a 1.00 L flask is set up with an initial concentration of 0.391 mol/L COCl2, calculate the equilibrium concentration of carbon monoxide in mol/L.
Find the comparative statics for an increase : Find the comparative statics for an increase in the sales tax, namely y^s/s and p^s/s , and provide an economic interpretation of them. What is the economic interpretation of an increase in the parameter a? You might want to plot the demand functi..
State mixing an unknown liquid with known liquid : can a liquid be identified by the same principl(e.g. mixing an unknown liquid with known liquid) and determining if the boiling point of the mixture is depessed if the two liquids are different?
What is the molar heat of fusion for water : It takes 33 melt 3.51 joules to exactly 1 gram of H2O. What is the molar heat of fusion for water, from this data?
How many joules of heat are lost : How many joules of heat are lost by 3473 kg granite as it cools from 41.1°C to -13.1°C?
Explain total ionic equation and net ionic equation : for question 1, 2, and 3, show states of matter and charges where appropriate. Also find molecular equation, total Ionic Equation, and Net Ionic Equation.

Reviews

Write a Review

 

Microeconomics Questions & Answers

  Draw two cost functions on the graph

Now suppose that x 2 is also free to vary. Derive the demands for the inputs and the long-run cost function of the firm - Draw the two cost functions on the graph. Do they cross? Which one lies higher?

  Defenders of communist economic systems

Defenders of Communist economic systems may point out that customers pay lower values for certain goods because government imposes a limit on what manufacturer may charge.

  Regulating the price of a monopolist

Show graphically how regulating the value of a monopolist can both increase quantity and lower price.

  What is firms supply function

Discuss the welfare effects of four possible policies: price floor, price support, production quota and voluntary production reduction. Which policy is least efficient? Discuss the differences in the benefits to farmers and the cost to the governme..

  Solution to the fundamental economic problem

Explain the effects of the new factory on the items below. Then place the number of each item on the circular-flow diagram to show whether the activity takes place in the product market or resource market

  Account competitive pressures

Explain why are prices usually higher for goods or services in London as opposed to Newcastle, or New York as opposed to San Fran?

  Study of costs of electricity generation

A study of costs of electricity generation for a sample of 56 British firms in 1946-1947 yielded the following long-run cost function: 16AVC = 1.24 + .0033Q + .0000029Q2 - .000046QZ - .026Z + .00018Z2

  Find consumer surplus in dollars

Assume that the market demand for broccoli is given through Q=1000-5P and the market supply of broccoli is given through Q=4P-80 where Q is quantity per year measured in hundreds of bushels

  Solve for equilibrium level of national income

Use the inverse matrix method to solve for equilibrium level of national income and the equlibrium rate of interest in this economy.

  Estimating profit maximizing price

Assume there're three firms with the same individual demand function. This function is Q=1,000-40P. Assume each firm had the diffeerent cost function these functions are: Firm 1: 4,000+ 5Q

  Promoting exports and restrict imports

Make a short treatment on the examine governments take to promote exports and restrict imports. Describe who profits and who loses from protectionist rules as they relate to net outcome for society.

  Analyzing the market for minivans

Suppose you are analyzing market for minivans. What will be the impact on the equilibrium price and quantity of each of the following events on the minivan market?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd