Question 5 1) Explain the difference between a per unit tax and alump sum tax:2) Explain the difference between a subsidy and a tax.3) Show (graphically) what impact a per unit tax wouldhave on a monopoly. What would happen to the firms priceand quantity if a per unit tax was used.4) Show (graphically) what impact a lump sum tax wouldhave on a monopoly. Would the firm's price and quantitychange? Would the firm's profit change after the use ofthe tax?5) Show (graphically) what impact a per unit subsidywould have on a monopoly. What would happen to thefirms price and quantity if a per unit subsidy was used.6) Show a monopoly graph and show the elastic andinelastic zones are of the firm's demand curve. (You don'thave to show anything but P=AR=D and MR on this graph).7) Sometimes the government feels that they need toregulate a monopoly. They might try to tax the monopoly(which probably wouldn't work well) or they may decide tosplit the monopoly firm into two different competingbusinesses. Another idea would be to tell the monopolythat they can only earn a "fair return." Show what a fairreturn would look like graphically for the monopoly.8) Show a monopoly graph and show the area ofconsumer surplus, producer surplus and deadweight loss.If a lump sum tax was used on the monopoly would thearea of consumer surplus, producer surplus or deadweightloss change?

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Answered: 5) Show (graphically) what impact a per…

5) Show (graphically) what impact a per unit subsidy would have on a monopoly. What would happen to the firms price and quantity if a per unit subsidy was used.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Question 5

1) Explain the difference between a per unit tax and a
lump sum tax:
2) Explain the difference between a subsidy and a tax.
3) Show (graphically) what impact a per unit tax would
have on a monopoly. What would happen to the firms price
and quantity if a per unit tax was used.
4) Show (graphically) what impact a lump sum tax would
have on a monopoly. Would the firm's price and quantity
change? Would the firm's profit change after the use of
the tax?
5) Show (graphically) what impact a per unit subsidy
would have on a monopoly. What would happen to the
firms price and quantity if a per unit subsidy was used.
6) Show a monopoly graph and show the elastic and
inelastic zones are of the firm's demand curve. (You don't
have to show anything but P=AR=D and MR on this graph).
7) Sometimes the government feels that they need to
regulate a monopoly. They might try to tax the monopoly
(which probably wouldn't work well) or they may decide to
split the monopoly firm into two different competing
businesses. Another idea would be to tell the monopoly
that they can only earn a "fair return." Show what a fair
return would look like graphically for the monopoly.
8) Show a monopoly graph and show the area of
consumer surplus, producer surplus and deadweight loss.
If a lump sum tax was used on the monopoly would the
area of consumer surplus, producer surplus or deadweight
loss change?

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