Suppose that a marketās inverse demand function is š=100ā0.2š. P is the price, and Q is the unit of goods. The cost function of the marketās monopolist is š¶(š)=20š+100.
a) What is the monopolistās marginal cost?
b) What is the monopolistās profit maximizing quantity (Q*), and associated price (P*), profit, consumer welfare, producer welfare, and DWL?
c) The government imposes $20 per unit tax on the firm. Repeat part b).
d) What tax rate, t, would achieve the same profit maximizing output as in part c)? What are the associated price the consumers pay (including the tax), price the producers receive (excluding the tax), Profit, CS, PS, DWL, and the tax revenue?
e) Which tax revenue is greater? Per unit tax from part c) or ad valorem tax from part d)?