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Problem 1 Refer back to problem set 1, question 2(a) and (c). Find the consumer and producer surplus before the tax is imposed. Find the
Problem 1 Refer back to problem set 1, question 2(a) and (c). Find the consumer and producer surplus before the tax is imposed. Find the consumer and producer surpluses after the tax is imposed, the tax revenue and the deadweight loss. Problem 2 - Rents from Patents Consider the QWERTY keyboard industry which consists of many firms with the identical cost function: C(q)=q310q2+35q The demand for QWERTY keyboards is D(p)=1000/p. (a) (b) (b) Derive the long-run equilibrium price in this industry. How many keyboards are produced (industry and firm level)? How many firms operate in the industry? Suppose one firm develops a patent (exclusive rights to use of a technology) which allows it to produce keyboards are a cost: C~(q)=30q3 Assuming the market price doesn't change, how much output will this firm produce? Why is it reasonable to assume the market price doesn't change? (Hint: what would likely happen if the price went down? What if the price went up?) (c) How much rent is derived from the patent? In other words, what will be maximum amount ( $ ) the firm would pay for this patent
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