6) Suppose each firm's long-run cost function in a perfectly competitive industry is given by C(q) = q- 4q+8q. Firms will enter the industry if profits are positive and leave the industry if profits are negative. Assume that the corresponding demand function is D = 4400 - 100P. (i) Compare the equilibrium price and quantity before and after the imposition of a 2 cents tax per unit sold. (ii) How much of the tax (per unit) is passed on to the consumers?

6) Suppose each firm's long-run cost function in a perfectly competitive industry is given by C(q) = q- 4q+8q. Firms will enter the industry if profits are positive and leave the industry if profits are negative. Assume that the corresponding demand function is D = 4400 - 100P. (i) Compare the equilibrium price and quantity before and after the imposition of a 2 cents tax per unit sold. (ii) How much of the tax (per unit) is passed on to the consumers?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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6) Suppose each firm's long-run cost function in a perfectly competitive industry is given by C(q) = q
4q+8q. Firms will enter the industry if profits are positive and leave the industry if profits are negative.
Assume that the corresponding demand function is D = 4400 - 100P.
(i) Compare the equilibrium price and quantity before and after the imposition of a 2 cents tax per unit sold.
(ii) How much of the tax (per unit) is passed on to the consumers?

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