Potential buyers are homogenous in their valuation for mobile phones and each potential buyer consumes at most 1 mobile phone ("homogenous" means that the consumers are similar to one another). Suppose that there are 2000 potential buyers and each potential buyer's willingness to pay for a mobile phone is 700. Assume that every firm's total cost curve is given by TC(q) = 400g, where q is the amount produced by the firm. Draw the market demand curve and the industry supply curve. b) Now suppose that the government places a $200 tax on each mobile phone purchase. How large-as measured in dollars-is the welfare loss (also called as deadweight loss) from this tax?

Potential buyers are homogenous in their valuation for mobile phones and each potential buyer consumes at most 1 mobile phone ("homogenous" means that the consumers are similar to one another). Suppose that there are 2000 potential buyers and each potential buyer's willingness to pay for a mobile phone is 700. Assume that every firm's total cost curve is given by TC(q) = 400g, where q is the amount produced by the firm. Draw the market demand curve and the industry supply curve. b) Now suppose that the government places a $200 tax on each mobile phone purchase. How large-as measured in dollars-is the welfare loss (also called as deadweight loss) from this tax?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.13P

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