Exercise 1 (Perfect competition) Explain if a tax of 1 per unit of output will aect the optimal output level for a competitive rm, if all rms in the market are identical and if rms can enter the market at no cost? Exercise 2 (Perfect competition) If the market demand curve is Q = 100 p what is the market price elasticity of demand? Assume the supply curve of individual rms is q = p and there are 50 identical rms in the market. Draw a diagram depicting the residual demand facing a single rm. Determine the price elasticity of residual demand that a single rm is facing at the competitive equilibrium. Exercise 3 (Monopoly) Assume that the market demand curve is @013) = 10 p and that the marginal cost of the rm is constant at 4. Determine the prot maximising monopoly price and output. Determine also the elasticity at the protmaximising monopoly price and output combination. Exercise 4 (Monopoly) Assume that the market demand curve is (2(1)) = 5/113. Determine the (point) price elasticity of demand. Determine also the total revenue at the prices is p = .C 1 and p = 30. Suppose production cost are 1 per unit of output and that the lowest production level is one unit of output. How many units should the monopoly produce? How many units should the monopoly produce if the demand is given by Qo) = 5/1) 'E