19 . 11. Excise Tax on Monopoly with Linear Demand and Constant MC A monopoly has the total cost equation: TC = 4Q + TAX where: t= excise tax rate ($ per unit) TAX = tQ = total tax paid by the monopoly firm %3D %3D The market demand (D) equation is: Qo = 24 - 2P a. Write the total revenue, marginal revenue and marginal cost (inclusive of tax) equations. TR = MR = MC = b. Solve for the profit-maximizing Q", P*, and n* as functions of the tax rate t. Q* = %3D p* = n* = When t rises by $1, P* rises by $ .

19 . 11. Excise Tax on Monopoly with Linear Demand and Constant MC A monopoly has the total cost equation: TC = 4Q + TAX where: t= excise tax rate ($ per unit) TAX = tQ = total tax paid by the monopoly firm %3D %3D The market demand (D) equation is: Qo = 24 - 2P a. Write the total revenue, marginal revenue and marginal cost (inclusive of tax) equations. TR = MR = MC = b. Solve for the profit-maximizing Q", P, and n as functions of the tax rate t. Q* = %3D p* = n* = When t rises by $1, P* rises by $ .

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter11: Profit Maximization

Section: Chapter Questions

Problem 11.7P

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