A firm faces the following average revenue(demand) curve:P = 10,000 – Qwhere Q is weekly production and P is price,measured in cents per unit. The firm's cost functionis given by TC = 500Q + 300,000. Assume that thefirm maximises profits and is the only companyselling in the market.a. What is the level of production, price, and totalprofit per week?b. If the government decides to levy a tax of 1,000cents per unit on this product, what will be thenew level of production, price, and profit?c. How does this result change if the governmentdoes not apply the tax and the company decidesto aim for the competitive outcome, given thepotential entry of competitors in the industry?

Average revenue refers to the amount of money earned per individual unit or user. Here, we…

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

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

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter11: The Firm: Production And Costs

Section: Chapter Questions

Problem 21P

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