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PaulKet PaulKet
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Posts: 488
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6 years ago
Consider a competitive firm with the short-run cost function
      C(q) = 20 + 6q + 5q2
The firm faces a market price of p for its output.
a.   Derive the firm's profit maximizing condition. Is the sufficient second order condition satisfied?
b.   Suppose a specific tax of t (t < p) is levied on only this firm in the industry. What is the profit maximizing level of output as a function of p and t? (Assume the price is high enough that the firm does not shut down)
c.   How does the output change as the tax increases? Use calculus to determine the relevant comparative static.
d.   How does the firm's profit chance as the tax increases? Again, use calculus to determine the relevant comparative static. Show that profit decreases as t increases.
Textbook 
Microeconomics: Theory and Applications with Calculus

Microeconomics: Theory and Applications with Calculus


Edition: 4th
Author:
Read 34 times
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The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.
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Answer verified by a subject expert
unExpectedunExpected
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6 years ago
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PaulKet Author
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6 years ago
Good timing, thanks!
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Yesterday
This helped my grade so much Perfect
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2 hours ago
Thank you, thank you, thank you!
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