l. [6 points) Suppose in the short run a perfectly competitive firm has variable cost = 3:11, and MC = q where q is the quantity of output produced. Also, the firm has fixed cost F = 243. a) [3 points) If the market price of the product is $42, how much output should the firm produce in order to maximize profit? 11) [3 points) How much prot will this rm make?I c) [3 points) What is the Breakeven price? 2) (22 Total Points) Suppose a monopolist's production function is given by q = MIN(5L,K). The price of Labor is w = $15, and the price of Capital is r = $4. Also, the Market Demand is given by P = 207 - 5Q. a) (4 points) What is the firm's Total Cost function? TC(q) = b) (2 points) What is the firm's Marginal Cost? MC = c) (2 points) How much output should the firm produce to maximize profit? OM =d) (2 points) What price will the firm charge if it maximizes profit? PM = e) (4 points) How much Labor and Capital will the firm hire? L* = K* = f) (2 points) What is the value of Consumer Surplus in this market? CS = g) (2 points) What is the value of Producer Surplus in this market? PS =h) (2 points) What is the deadweight loss that results from this market? DWL = i) (2 points) What is the value of the Lerner Index? Lerner Index =3. (22 Total Points} Suppose a public referendum is being held on whether or not to levy a tax on cigarettes. Currently, the supply of cigarettes is given by Qs = -4t} + 4P. You estimate the demand for cigarettes to be Qd = 442} - P. You are asked to evaluate the likely effects of a tax on cigarettes equal to $l.{l per pack of cigarettes. Specifically, you are to le a report which predicts by how much this will reduce the amount of cigarettes sold. You are also asked to estimate the proportion of the tax that will be paid by the cigarette companies {sellers}, and the proportion of the tax that will he paid by the smokers (consumers) of cigarettes. To do this, you will rst need to calculate the current price and quantity of cigarettes sold. a} (4 points} What is the equilibrium price and quantity ofcigarettes'? Pit: Qi: Next you know from your economics class that you will need to know the price elasticity of demand and the price elasticity of supply of cigarettes. b} (2 points} What is the price elasticity of demand for cigarettes at the equilibrium price? (Please leave your answer in the form of a fraction.) c) (2 points) What is the price elasticity of supply of cigarettes at the equilibrium price? (Please leave your answer in the form of a fraction.) Using your answers to b] and c}, you are now able to determine what proportion of the tax will be paid by buyers, and what proportion of the tax will be paid by sellers. {1) {3 points) What proportion of the tax will be paid by sellers? {Please leave your answer in the form of a fraction.) Seller's Proportion = e) (3 points) What price will buyers pay after the tax is imposed? Buyer's Price = f) (4 points) What quantity of cigarettes will be sold after the tax? Of = g) (4 points) What is the deadweight loss from the tax? DWL =