Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

I need question B. . (35 points) Consider a market with two rms in Cournot (quantity) competition. Mar- ket demand is given by qp) =

image text in transcribed

I need question B.

image text in transcribedimage text in transcribed
. (35 points) Consider a market with two rms in Cournot (quantity) competition. Mar- ket demand is given by qp) = a p. Each rm faces a constant marginal cost of c. a. [15 points) Suppose that the government imposes a amt tax of 6, so that if a rm sells q units of the good, that rm owes q . 5 to the government. Find the equilibrium quantity, price paid by consumers, consumer surplus, and tax revenue. Your answers should be functions of a, 'r, and c. Make sure you box your answers. Hint: you can think of 6 as an increase in the rms' marginal cost. b. (20 points) Now suppose the government imposes a excise tax of T, so that if PR is the price charged by firms, the price that consumers pay is p = PR(1 + 7). Find the equilibrium quantity, price paid by consumers, consumer surplus, producer surplus, and tax revenue. Your answers should be functions of a, , and c. Make sure you box your answers. Note: This is the most math-intensive question on the exam. Feel free to skip this on first glance and come back to it. Hint: Start by solving for PR as a function of a, 91, 92 and T

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Microeconomics

Authors: Austan Goolsbee, Steven Levitt, Chad Syverson

1st Edition

978-1464146978, 1464146977

More Books

Students also viewed these Economics questions

Question

Describe the criteria for an effective budget.

Answered: 1 week ago

Question

2. What do the others in the network want to achieve?

Answered: 1 week ago

Question

1. What do I want to achieve?

Answered: 1 week ago