Microeconomic monopoly, Microeconomics

A monopolist faces the following demand function for its product: Q = 45 - 5P

The fixed costs of the monopolist are $12 and the variable costs are $5 per unit.
a) What are the profit-maximizing price and quantity? What will be the profits at these price and output levels?

b) If the government imposes an annual tax on the firm of $10, what will be the profit-maximizing price, output, and profits? Who bears the burden of the tax? Why? (Distinguish short run and long run).

c) If, instead of the annual tax, the government imposes an excise tax of 50 cents per unit of output sold, what is the impact on the profit-maximizing price, output, and profits? Who bears the burden of tax? Why?

c) If, instead of the annual tax, the government imposes a ceiling $6 on the price of the firm's product, what output will the firm produce, and what will be the total profits? What is the impact of the price ceiling on 'market efficiency'? (Hint: Compare the quantity produced under monopoly without price ceiling with quantity produced with price ceiling, and with quantity that would be produced by a perfectly-competitive firm).

e) Calculate the consumer surplus under each of the following alternatives:
* Monopoly without tax and without price ceiling
* Monopoly with tax of 50 cents per unit
* Monopoly without tax, but with price ceiling of $6
* Perfectly competitive inudstry

Illustrate your answers with diagrams whenever appropriate.

Posted Date: 4/3/2013 1:00:38 AM | Location : United States







Related Discussions:- Microeconomic monopoly, Assignment Help, Ask Question on Microeconomic monopoly, Get Answer, Expert's Help, Microeconomic monopoly Discussions

Write discussion on Microeconomic monopoly
Your posts are moderated
Related Questions
What is the difference between indifference curve and isoquants?  An indifference curve shows dissimilar combinations which a consumer can buy with a given level of income. Ind

What are the properties of the profit function? Properties of the Profit Function: The properties specified below follow solely by the assumption of profit maximization. No

Problem 1: Write short notes on all of the following: (a) Log Linear regression model (b) Lin-Log regression model (c) Individual versus Overall Significance Probl

Expected Utility: Theory Assume that a utility index exists which conforms to the five axioms. The expected utility for the two-outcome lottery L = (P, A, B) is given by,

The following hypotheses are concerned with the general impact of FDI from Costa Rica trading partners on exports from the technology sector:  H1:   There is a positive signifi

Micro Economics 1. Discuss the short-run cost-output relations. 2. Write a short note on pure competition. 3. Describe excess profit criterion. 4. Discuss the vario

what do you meant by rent?

Uses of population census: It is used to determine the size and the growth rate of the population at a country. The helps the government in planning for education, transporta

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

2) Proctor & Gamble (P&G) and the Lever Co. decide to form a laundry detergent cartel for future sales in Europe. Lever is more efficient than P&G. a)illustrate graphically how the