Question
An industry consists of many identical firms, each with the short-run cost function: c(y)=80+25y6y^2 +y^3 i. If the market price is , derive the supply
An industry consists of many identical firms, each with the short-run cost function: c(y)=80+25y6y^2 +y^3
i. If the market price is , derive the supply curve of the firm y(p).
ii. If the government imposes a lumpsum tax of dollars on every firm in
the industry, how will it change the output choice of each firm in the short run? Hint: how will this change the expression for the firm's profit? Explain.
iii. If the government imposed a percentage tax of t (0,1) on a firm's profits, how would that change the output choice of each firm in the short run? Explain.
iv. If the government imposed a tax of $t per unit produced by a firm, how would that change the output choice of each firm in the short run? Explain.
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