TC=a -6Q + 140 Q + Pa 1400-75Q (i)What would be the firm\'s fixed cost? How dic
ID: 1127576 • Letter: T
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TC=a -6Q + 140 Q + Pa 1400-75Q (i)What would be the firm's fixed cost? How dic you know? (ii)Find the profit maximizing output for this firm. (ili)What price will the firm charge for each unit of its output? (iv)At what price will the firm shut down? (4)The market for a particular type of tool can be described by the following demand and supply curves. Qd. = 200-2P Qs=-100 + 4P (a)Find the equilibrium price and equilibrium quantity transacted in this market (b)Suppose the government imposes a sales tax of $O.50 on each unit of commodity sold ()Determine the price paid by the consumers and the price received by the producers of this product. (i)Find the equilibrium quantity transacted in this market. (ii) What is the total tax revenue collected by the government? (iv)Briefly comment on the "gainers" and "losers" in the aftermath of the implementation of this policyExplanation / Answer
Q4 i) Equilibrium has demand = supply
200 - 2p = -100 + 4p
300 = 6p
p* = 50
q* = 100
This is the equilibrium price and quantity
b) i) When a $0.50 tax is imposed on sellers, new supply is Q = -100 + 4(P + 0.5). New prices and quantity are
-100 + 4P + 2 = 200 - 2P
6P = 302
Price paid by buyers = $50.33
Quantity demanded and supplied = 200 - 2*50.33 = 99.34
Price received by sellers is (99.34 + 100)/4 = $49.83
ii) It is 99.34 units
iii) Revenue = tax x quantity = 99.34 x 0.50 = $49.67
iv) Gainer is only government while losers are both buyers and sellers.,
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