Question
Each of the 10 firms in a competitive market has a cost function of C=25+q2. The market demand function is Q=120p. a. Determine the equilibrium
Each of the 10 firms in a competitive market has a cost function of C=25+q2. The market demand function is Q=120p.
a. Determine the equilibrium price, quantity per firm, and market quantity.
b. Determine the profit/loss incurred by each firm.
c. What effect does a specific tax of $2.40 per unit have on the equilibrium price and quantities? Determine the profit per firm with the tax.
d. In this part, draw a graph that will show the relationship between the market and the firm. Include all the information about the price, market quantity and quantity per firm. Shade the amount of profit or loss.
e. In the same graph, show the effect of the tax on the firm and how it changes the quantity and the profit or loss.
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