Income Tax Case Summary

Satisfactory Essays
Reduction in the fares will result in a reduction in the revenue derived from the sale of the tickets. However, a reduction in the fares leads to an increase in demand thus selling many tickets. The quantity effect is the additional revenue derived from the increased sale of tickets due to the lower price (Raciborski, & Weil, 2014).On the other hand, price effect is as a result of the loss in revenue on the sale of the tickets. The highest downloads is 15. This is the highest quantity that can be sold. Bob would, therefore, charge $0. The highest revenue is $24. In this case, Bill would charge $4 and the number of downloads would be 6. At the profit maximization point, the marginal cost must be less than the marginal revenue (Mankiw, 2014). The marginal cost is $4. In this case, Ben would charge $6 since the marginal revenue is $5 which is greater than the marginal revenue of $4. He would, therefore, sell 3 downloads. A price that is equivalent to the marginal cost is the efficient price. Brad would, therefore, charge $4 which is equivalent to the marginal cost. Brad would sell 6 downloads. The monopolist should charge a price of 0.80 which is equivalent to the production of 5,000 kWh. The above triangle represents the deadweight loss.…show more content…
It implies that the monopolist will incur a loss. The loss is equivalent to the below shaded rectangle. Imposing of the price ceiling indicates that the monopolist will incur losses and will eventually exit the market in the long run (Lehdonvirta, & Castronova, 2015). Imposition of the price ceiling of $0.50 will lead to a quantity demanded of 8,000. The company will be at its break even since it will make zero profit. The price is equivalent to the average total cost (Lehdonvirta, & Castronova,
Get Access