A firm faces the following average revenue (demand) curve:

P = 20,000 - Q

whereQ is monthly production and P is price, measured in cents per unit. The firm's cost function is given by TC = 1,000Q + 500,000. Assume that the firm maximises profits and is the only company selling in the market.

1. What is the level of production, price, and total profit per month?

b.If the government decides to levy a tax of 1,000 cents per unit on this product, what will be the new level of production, price, and profit?

c.How does this result change if the government does not apply the tax and the company decides to aim for the competitive outcome, given the potential entry of competitors in the industry?

d.Present a graphical representation of this case study and discuss about the profit maximising output under the different scenarios presented above. Would you introduce other policy interventions in this case? Under which circumstances?