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QUESTIUN [I (32 marks) 9* 'L' There are l identical rms in the Wlmtc chopper industry in a small country of Zentosa. The market demand
QUESTIUN [I (32 marks) 9* \"'L' There are l identical rms in the Wlmtc chopper industry in a small country of Zentosa. The market demand for the choppers is given y Q n Ll'tlt'l' - it} P or P = 22' (15$de and each rm's short-run total cost and marginal cost (in S] are given by STCI liq and M6356. where q and Q denote each firm's and market output of electric choppers per day, respectively. and P denotes the market price of each chopper. Assume that each of the 100 rms is producing and selling an equal number of electric choppers in e uilibrium. Answer the following question. Show your numerical and graphical work as well. (I) [12 marks) What will be the market price of the choppers in the short run and how many choppers will each firm produce per day? (I) (1312 = It?! marks} Since the electric choppers may produce too much of un-recyclable domestic wastes, the Zentosa government has decided to impose a 51 sales tax per unit which buyers are legally - i.e. statutorily responsible to pay. {i} After the sales tax, how many choppers will each rm produce per day and how much ofthe $2 per-unit sales tax will be eventually borne by buyers and sellers. respectively? (ii) Do the welfare analysis. That is, discuss how buyers, sellers and the whole society will be affected in terms of social welfare. respectively? As usual, quantify your answers
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