1. A monopolist has a cost function given by C(y)=y? and faces a demand curve given by P(y) = 120-y. %3D (a) What is the profit maximizing level of output and the price that the monopolist will charge? Show your calculations. (b) If you impose a lump sum tax of £100 on this monopolist, what will be the impact on output? Explain your calculations and the intuition behind your result. (c) If you wanted to choose a price ceiling for this monopolist so as to maximize consumer plus producer surplus, what price ceiling should you choose? How much output will the monopolist produce at this price ceiling? Explain your calculations. (d) Suppose that you impose a specific tax of £20 per unit of output. What will be the monopolist's profit maximizing level of output? Explain your derivation and comment on the impact on output.

1. A monopolist has a cost function given by C(y)=y? and faces a demand curve given by P(y) = 120-y. %3D (a) What is the profit maximizing level of output and the price that the monopolist will charge? Show your calculations. (b) If you impose a lump sum tax of £100 on this monopolist, what will be the impact on output? Explain your calculations and the intuition behind your result. (c) If you wanted to choose a price ceiling for this monopolist so as to maximize consumer plus producer surplus, what price ceiling should you choose? How much output will the monopolist produce at this price ceiling? Explain your calculations. (d) Suppose that you impose a specific tax of £20 per unit of output. What will be the monopolist's profit maximizing level of output? Explain your derivation and comment on the impact on output.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter14: Monopoly

Section: Chapter Questions

Problem 14.2P

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