Question

2. The market for air conditioners has: Total Cost: TC = 20 + 10Q +(3/4)Q2 Marginal...

2. The market for air conditioners has: Total Cost: TC = 20 + 10Q +(3/4)Q2 Marginal Cost: MC = 10 + (3/2)Q Marginal Revenue: MR = 1,010 – 0.5Q Demand: Q = 4,040 – 4P

2a. If a monopoly controls the market, calculate the equilibrium price and quantity of air conditioners.

2b. Calculate the monopoly profits from part a.

2c. If the government imposed a tax of $80 per air conditioner that the monopoly sells, calculate the equilibrium new price and quantity of air conditioners and the government tax revenue.

2d. Calculate the monopoly profits from part c.

2e. Calculate the minimum tax that the government could charge to make the monopoly produce no output.

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