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If the government wanted to encourage a monopoly to produce the socially efficient quantity, should it use a per unit tax or a per unity subsidy? 1.Explain how this tax or subsidy would achieve the socially efficient level of output. Among the various interested parties the monopoly firm the monopoly's consumers and other tax papers who would support the policy and who would oppose it? SOLUTIO Computation of the following When we want a socially efficient quantity we need to give a per unit subsidy to the monopolist. This is because the firm produces at Qm, which is less than Qs socially efficient level. To encourage higher output the firm has to be compensated for the losses from the higher output. The subsidy lowers costs of production to MC1. Now when the firm equates MC1 with its MPB we arrive at Qs as the optimal level of output. The only loser is tax payer, who may not even use this good, yet he pays for it. The monopolist is happy as he continues to maximize its profits in both situations by equating MC with MPB benefits / cost MC MC1 MSB MPB Qm Qs Q MPB: marginal private benefit MSB: marginal social benefit.
The president of a small firm has been complaining to the controller about rising labor and material costs. However, the controller notes that the average costs have not increased during the past year. Is it possible?
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Do an economic analysis of two giant competitor brands, Coke and Pepsi, in the context of them being rivals in the "Twenty-First Century" and use all the knowledge you have gathered over the last several weeks. (demand and supply, market equilibrium,..
1.Examine the case for public ownership of an industry where a natural monopoly exists.
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The following is a hypothetical short run production function calculate the total output when two hours of labor are employed?
you are the ?nal voter in a brand new start-up league the ultra fun foosball league uffl. the directors are looking to
Using the regression results and the other computations from Assignment 1, determine the market structure in which the low-calorie frozen, microwavable food company operates.
1.How would you go about deciding whether person A or person B gets more personal benefit from each of the following?
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