There is an industry consisting of 12 firms, each with total cost function given by TC(q) 3q²-2q+867, where the fixed costs are non-sunk. The demand for the industry's product given by Q(p) = 448-p per month. Firms are price takers. (a) Find the short-term equilibrium price, demand, the quantity produced by each firm, well as firm's profit. What is the consumer surplus? What about the producer's surplu (b) The government urgently needs to collect some extra tax revenues in the next fo months to meet debt payments. This implies that it needs to collect the amount T = 1000 per month from the industry. Calculate the tax level needed to raise th revenue depending on the type of tax. Which tax type is the better from a welfa perspective? i. An output tax of t per unit sold imposed on the firms.
There is an industry consisting of 12 firms, each with total cost function given by TC(q) 3q²-2q+867, where the fixed costs are non-sunk. The demand for the industry's product given by Q(p) = 448-p per month. Firms are price takers. (a) Find the short-term equilibrium price, demand, the quantity produced by each firm, well as firm's profit. What is the consumer surplus? What about the producer's surplu (b) The government urgently needs to collect some extra tax revenues in the next fo months to meet debt payments. This implies that it needs to collect the amount T = 1000 per month from the industry. Calculate the tax level needed to raise th revenue depending on the type of tax. Which tax type is the better from a welfa perspective? i. An output tax of t per unit sold imposed on the firms.
Chapter12: The Partial Equilibrium Competitive Model
Section: Chapter Questions
Problem 12.6P
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Transcribed Image Text:1. There is an industry consisting of 12 firms, each with total cost function given by TC(q)
3q² - 2q +867, where the fixed costs are non-sunk. The demand for the industry's product is
given by Q¹ (p) = 448 - p per month. Firms are price takers.
(a) Find the short-term equilibrium price, demand, the quantity produced by each firm, as
well as firm's profit. What is the consumer surplus? What about the producer's surplus?
(b) The government urgently needs to collect some extra tax revenues in the next four
months to meet debt payments. This implies that it needs to collect the amount of
T = 1000 per month from the industry. Calculate the tax level needed to raise this
revenue depending on the type of tax. Which tax type is the better from a welfare
perspective?
i. An output tax of t per unit sold imposed on the firms.
ii. 7-percent tax on firms' profits.
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