Question
Suppose first that a market consists of 300 identical firms, all with the same cost curve: TC(q)= 0.1 + 150q 2 . The market demand
Suppose first that a market consists of 300 identical firms, all with the same cost curve:
TC(q)= 0.1 + 150q2. The market demand is given by Qd (p) = 60 - p.
(A) What is the equilibrium price and quantity?
(B) What quantity must each firm produce and sell at equilibrium?
(C) Do firms make positive profits in the market equilibrium?
(D) Calculate consumers' surplus, producers' surplus and total surplus.
The government imposes a tax of 10 pe unit of the product on the suppliers.
(E) What will be the new equilibrium price and quantity?
(F) Do firms make positive profits at market equilibrium?
(G) What will be the new consumes surplus, produces surplus and total surplus?
(H) Calculate the value of the DWL imposed by the tax.
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