Discuss other methods the government can use to restore the social optimum. Discuss advantages and disadvantages of the methods you propose. Explain.
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Suppose a firm A produces a product q, but also pollution x that affects a second firm B. Firm A is a competitive firm and faces an
D. Discuss other methods the government can use to restore the social optimum. Discuss advantages and disadvantages of the methods you propose. Explain.
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- Suppose a firm A produces a product q, but also pollution x that affects a second firm B. Firm A is a competitive firm and faces an equilibrium price of £12 for its product. The cost function of firm A is . Firm B is a competitive firm and faces an equilibrium price of £10. Firm B’s cost function is . Compute the equilibrium prices and quantities and the profits of the two separate, competitive firms. Interpret the first order conditions. Explain.a) Suppose a firm A produces a product q, but also pollution x that affects a second firm B. Firm A is a competitive firm and faces an equilibrium price of £12 for its product. The cost function of firm A is CA(q,x) = q2 + (x − 4)2. Firm B is a competitive firm and faces an equilibrium price of £10. Firm B’s cost function is CB(r,x) = r2 + xr. Compute the equilibrium prices and quantities and the profits of the two separate, competitive firms. Interpret the first order conditions. Explain. b) Compute the social optimum, that is, the equilibrium prices, quantities, and profit when firm A and B are merged. Interpret the conditions and compare it to the solution in (a). Explain. c)Devise a quantity tax on product q for firm A in (a) such that the government can restore the social optimum in (b).a) Suppose a firm A produces a product q, but also pollution x that affects a second firm B. Firm A is a competitive firm and faces an equilibrium price of £12 for its product. The cost function of firm A is C_A (q,x)=q^2+〖(x-4)〗^2. . Firm B is a competitive firm and faces an equilibrium price of £10. Firm B’s cost function is C_B (r,x)=r^2+xr . Compute the equilibrium prices and quantities and the profits of the two separate, competitive firms. Interpret the first order conditions. Explain. b) Compute the social optimum, that is, the equilibrium prices, quantities, and profit when firm A and B are merged. Interpret the conditions and compare it to the solution in (a). Explain. c) Devise a quantity tax on product q for firm A in (a) such that the government can restore the social optimum in (b). d) Discuss other methods the government can use to restore the…
- a) Suppose a firm A produces a product q, but also pollution x that affects a second firm B. Firm A is a competitive firm and faces an equilibrium price of £12 for its product. The cost function of firm A is (q,x) = q2 + (x-4)2 . Firm B is a competitive firm and faces an equilibrium price of £10. Firm B’s cost function is (r,x) = r2 + xr. Compute the equilibrium prices and quantities and the profits of the two separate, competitive firms. Interpret the first order conditions. Explain. b) Compute the social optimum, that is, the equilibrium prices, quantities, and profit when firm A and B are merged. Interpret the conditions and compare it to the solution in (a). Explain. c) Devise a quantity tax on product q for firm A in (a) such that the government can restore the social optimum in (b). d) Discuss other methods the government can use to restore the social optimum. Discuss advantages and disadvantages of the methods you propose. Explain.Suppose a firm A produces a product q, but also pollution x that affects a second firm B. Firm A is a competitive firm and faces an equilibrium price of £12 for its product. The cost function of firm A is . Firm B is a competitive firm and faces an equilibrium price of £10. Firm B’s cost function is . A. Compute the equilibrium prices and quantities and the profits of the two separate, competitive firms. Interpret the first order conditions. Explain. b) Compute the social optimum, that is, the equilibrium prices, quantities, and profit when firm A and B are merged. Interpret the conditions and compare it to the solution in (a). Explain. c) Devise a quantity tax on product q for firm A in (a) such that the government can restore the social optimum in (b).Suppose that the market for gourmet deli sandwiches is perfectly competitive and that the supply of workers in this industry is upward-sloping, so that wages increase as industry output increases. Delis in this market face the following total cost: TC = Q³ - 20Q² + 40Q + W, where Q is the number of sandwiches, and W is the daily wage paid to workers. The wage, which depends on total industry output, equals W = 0.2NQ, where N is the number of firms. Market demand is QD = 700 - 15P. In the long-run equilibrium, the market price is $ $1600 $46.67 $13 $10
- A cement factory and a hotel are situated next to each another. The cement factory’s demand is described by the inverse demand function: PCement = 200 – C. The factory’s cost function is CCement = 2C2. The inverse demand function for the hotel is given by: PHotel = 100 – H – 2C (in essence, as the factory produces more cement C, the hotel’s demand goes down because of the pollution the factory generates). The hotel’s cost function is: CHotel = ½ H2. a)Set up the profit maximization problems of the factory and the hotel separately. Then solve for the profit-maximizing quantities and prices for each party. Suppose a good-natured “social planner” wants to impose a Pigouvian tax on the cement factory. Find the equilibrium tax rate T* that would allow achieving the socially optimal outcomeSuppose the profit maximizing firm sells the same good in two individual markets that it is able to keep separate. Since the price elasticity of demand is different in each market, the firm recognizes that rather than charge all customers the same price, it can increase profits by charging different prices in each of the two markets. The demand equations for each market are shown below: Market 1 P=25-2Q Demand The firm's Total Cost Function is: TC=5Q a) What is the optimal output in Market 1? b) What price will be charged in Market 1? Market 2 P=15-Q c) what is the optimal output in market d) what price will be charged in market e) what is the firm's total profit f ) illustrate your answerA microbrewery operates next to the Bushville Lake and uses water from the lake during production. The marginal cost of beer production is: MC = 8 + 2Q where Q is the quantity of beer produced (keg). The brewery sells its output at a market price of $40/keg. Because the industry is perfectly competitive, the brewery’s action does not affect the market price. The Bushville Lake is also used for kayaking and recreational fishing, but pollution from the brewery reduces the quantity of fish available and makes the lake very unpleasant. Each keg of beer produced emits a pound of pollutants that causes a loss of recreation opportunities worth $3. a) How much beer will be produced? b) What is the efficient level of beer production? If the government used a Pigouvian tax to achieve this goal, what would the tax be?
- Two farmers produce milk for local town with local milk demand given by Q=100-1/3P (P denotes price measured in Rands, Q denotes the quantity measured in litres). Both farmers have the same cost function given by TC=150+2q (where q denotes output)a. What output should farmer 1 produce if he or she expects their rival to produce 20 units?Beta Industries manufactures floppy disks that consumers perceive as identical to those produced by numerous other manufacturers. Recently, Beta hired an econometrician to estimate its cost function for producing boxes of one dozen floppy disks. The estimated cost function is C = 20 + 2Q^2. a. What are the firm's fixed costs? b. What is the firm's marginal cost? Now suppose other firms in the market sell the product at a price of $10 c. How much should this firm charge for the product? d. What is the optimal level of output to maximize profits? e. How much profit will be earned? f. In the long run, should this firm continue to operate or shut down? Why? *Please show all work*A firm operates two plants. The total cost schedules for the respective plants are TC1 = 5*Q1 + .1*Q12 and TC2= 2*Q2 + .1*Q22. The firm’s demand schedule is Q = 160 – 10*P. What is the profit maximizing amounts to be allocated to plant 1? Plant#1 =