1 Suppose that the linear supply curve intersects the linear demand curve. The initial equilibrium is e. (1) Consider a specific (per unit) tax t, show the tax effect on Government revenue. (2) Now suppose the demand curve becomes flatter, but still goes through point e, so that it is more elastic at e than originally. Discuss how the tax affects Government revenue differently than with the original demand curve (larger or smaller). Show the solutions with graph Question 2 Consider a competitive firm in an industry. The short-run cost function = 300 + 30 + ^2 , and the market price is 60 . (1) Determine the average variable cost () and the average cost () (2) What is the profit-maximizing output level for the firm? (3) What is the profit of the firm if it produces the profit-maximizing output? (4) Will the firm operate, or will it shut down in the short run