Question

1. A monopoly firm faces a demand curve given by P=70-Q and has a cost curve given by TC=0.7Q^2

a) Specify its output*, price*, and profits*.

b) Suppose a specific tax of $16 per unit produced is imposed upon the firm; how does this affect the firm's *output, price, and profits.

c) If there is a fixed franchise tax of $160 implemented on the firm, how does this affect the output, price, and profits.

d) If there is a corporate profits tax of 50% imposed on the firm, how does this change the firm's optimal output, price, and profits.

step by step solutions would be very helpful as this will assist in reviewing for an upcoming exam. thanks

Answer 1