### [solution] » 3. (15 points) A company in a competitive market with a cost function C(q) = 100 + 10q ? q2 +13q3

Description

The Question

3. (15 points) A company in a competitive market with a cost function C(q) = 100 + 10q ? q2 +13q3has learned that it will now have to face a specific tax of ? = \$10 (per unit). This specific taxmeans that for every unit of output the firm sells it has to pay a tax of ? dollars. If the firm sells qunits, it pays a total tax of q? .(a) (5 points) What is the firm?s cost function including the tax?(b) (10 points) What is this firm?s short-run profit-maximizing output if the market price is p?(Hint: the solution has to be expressed as a function of p and has to be defined for valuesthat make economic sense, e.g. only positive quantities.)

4. (30 points) A monopolist faces the inverse demand for its output: p = 30 ? Q. The monopolistalso has a constant marginal and average cost of \$4/unit.1(a) (10 points) What is the monopolist?s profit-maximizing level of output? What is the monopolist?sprofit at this level of output?(b) (10 points) What is the consumer surplus? Show it in a graph along with the monopolist?sequilibrium; label the monopolist?s equilibrium eM.(c) (5 points) What would the competitive equilibrium be if the demand curve were the same asthe one faced by the monopolist and the market supply curve were equal to the monopolist?smarginal cost, i.e. P = MC? Show this equilibrium in the same graph as above and label iteC.(d) (5 points) What is the gain in consumer surplus if this market were perfectly competitiveinstead of a monopoly?

#### Solution details

Solution #00020253

##### [solution] » 3. (15 points) A company in a competitive market with a cost function C(q) = 100 + 10q ? q2 +13q3.zip

This paper was answered on 14-Oct-2020

STATUS

QUALITY

Approved

Oct 14, 2020

EXPERT

Tutor

#### BEST TUTORS

We have top-notch tutors who can do your essay/homework for you at a reasonable cost and then you can simply use that essay as a template to build your own arguments.

You can also use these solutions:

• As a reference for in-depth understanding of the subject.
• As a source of ideas / reasoning for your own research (if properly referenced)
• For editing and paraphrasing (check your institution's definition of plagiarism and recommended paraphrase).
This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student. 