per is given by TC = 500Q + 300,000. Assume that the firm maximises profits and is the only company selling in the market. a. What is the level of production, price, and total profit per week? If +h tax :1 000

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A firm faces the following average revenue
(demand) curve:
P = 10,000 – Q
where Q is weekly production and P is price,
measured in cents per unit. The firm's cost function
is given by TC = 500Q + 300,000. Assume that the
firm maximises profits and is the only company
selling in the market.
a. What is the level of production, price, and total
profit per week?
b. If the government decides to levy a tax of 1,000
cents per unit on this product, what will be the
new level of production, price, and profit?
c. How does this result change if the government
does not apply the tax and the company decides
to aim for the competitive outcome, given the
potential entry of competitors in the industry?
Transcribed Image Text:A firm faces the following average revenue (demand) curve: P = 10,000 – Q where Q is weekly production and P is price, measured in cents per unit. The firm's cost function is given by TC = 500Q + 300,000. Assume that the firm maximises profits and is the only company selling in the market. a. What is the level of production, price, and total profit per week? b. If the government decides to levy a tax of 1,000 cents per unit on this product, what will be the new level of production, price, and profit? c. How does this result change if the government does not apply the tax and the company decides to aim for the competitive outcome, given the potential entry of competitors in the industry?
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