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Quesiton 3 (34 points) Innusgay has a monopoly on widgets. The have a marginal revenue of 120-6Q and a production function of Q = L.25
Quesiton 3 (34 points) Innusgay has a monopoly on widgets. The have a marginal revenue of 120-6Q and a production function of Q = L.25 K.25 and $15 worth of fixed costs. The price of labor is $15 and the price of capital is $10. Suppose a tax of $24 per unit is levied on producers. It may be useful to graph this tax. You can use the space below to draw a graph, but your graph will not be graded. a) (8 points) What is the monopoly price and quantity of widgets before the tax? b) (6 points) What is the price the monopolist keeps, the price the buyer pays, and quantity of widgets sold with the tax? c) (3 points) How much of the monopolist's profit is destroyed by the tax?d) (3 points) What proportion of the tax will be paid by the monopolist? e) (2 points) What proportion of the tax will be paid by consumers? f) (8 points) What is the deadweight loss from the tax? g) (4 points) Draw the isocost and isoquant for the monopolist producing the after-tax quantity
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