(c) If you wanted to price regulate this monopolist so as to maximise consumer plus producer surplus, what price ceiling would you impose? How much output will the monopolist produce at this price ceiling? Explain your calculations. (d) Suppose that you impose a specific tax of £20 per unit of output. What would its profit maximising level of output be? Explain your derivation and comment on the impact on output.

(c) If you wanted to price regulate this monopolist so as to maximise consumer plus producer surplus, what price ceiling would you impose? How much output will the monopolist produce at this price ceiling? Explain your calculations. (d) Suppose that you impose a specific tax of £20 per unit of output. What would its profit maximising level of output be? Explain your derivation and comment on the impact on output.

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

part C D

2. A monopolist has a cost function given by C(y)=y² +12 and faces a demand curve given by
P(y) = 24-y.
(a) What is the profit maximising level of output and price charged by the monopolist?
Show your calculations.
(b) If you impose a lump sum tax of £100 on this monopolist, what would be the impact on
output? Explain your calculations and your result.
(c) If you wanted to price regulate this monopolist so as to maximise consumer plus
producer surplus, what price ceiling would you impose? How much output will the
monopolist produce at this price ceiling? Explain your calculations.
(d) Suppose that you impose a specific tax of £20 per unit of output. What would its profit
maximising level of output be? Explain your derivation and comment on the impact on
output.

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