Question
The inverse market demand in an industry is p = 15 - 2q. Firms in the industry use a technology with a fixed marginal cost.
The inverse market demand in an industry is p = 15 - 2q. Firms in the industry use a technology with a fixed marginal cost. A firm producing y units incurs a total cost of C(y) = 3y. The government imposes a tax of 8 dollars on the total profit made by the monopoly. The monopoly pays for this tax regardless of the quantity it sells or the profit it makes. Under this tax, (1) how many units would the monopolist sell? (2) What would be the price per unit? (3) What would be the consumer surplus? (4) What would be the producer surplus ? (5) What would be the dead-weight loss compared to the fully efficiency?
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