= 5] Assume several identical firms engaged in perfect competition have the short run production function Q L¹/a. Each firm pays a wage of w for each unit of labor employed and fixed costs are 10. a) Assume the firm faces a tax, t, on its output. Determine how a change in this tax will affect output (22). b) Assume the firm faces a tax, t, on its profit. Determine how a change in this tax will affect output. c) based on your answers above, which of these two taxes is preferred by a government interested in minimizing the harm to workers in the industry?

= 5] Assume several identical firms engaged in perfect competition have the short run production function Q L¹/a. Each firm pays a wage of w for each unit of labor employed and fixed costs are 10. a) Assume the firm faces a tax, t, on its output. Determine how a change in this tax will affect output (22). b) Assume the firm faces a tax, t, on its profit. Determine how a change in this tax will affect output. c) based on your answers above, which of these two taxes is preferred by a government interested in minimizing the harm to workers in the industry?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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reasons for why this representative
5] Assume several identical firms engaged in perfect competition have the short run production function Q =
L¹/a. Each firm pays a wage of w for each unit of labor employed and fixed costs are 10.
a) Assume the firm faces a tax, t, on its output. Determine how a change in this tax will affect output (
b) Assume the firm faces a tax, t, on its profit. Determine how a change in this tax will affect output (2).
c) based on your answers above, which of these two taxes is preferred by a government interested in
minimizing the harm to workers in the industry?

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Imagine a perfectly competitive wood industry composed of 240 identical firms. The production output, q for each firm is determined by the function 9 = K1/2* L¹1/2, where K represents capital and L stands for labor. The $25 and PL prices for capital and labor are PK = $4, respectively. With labor fixed at 25 units, and the market demand described by Qd = 260 2P, what would be the economic profit or loss at equilibrium for these firms? -98 -99 99 98 = =
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