3. Suppose there are ten identical firms in an industry. The cost function for each firm is: 1 c(y) = y² + wy where y is the firm's output of the homogenous good, and where w is the wage rate of workers in the industry. Suppose further that w = 1.9Qs, where Qs denotes total industry output. (a) Find the industry supply function assuming symmetry. (b) Suppose market demand is QD = 6 p, where p is the output price. Find the price, market quantity, wage rate, and total surplus in equilibrium. (c) Now suppose that the government imposes a unit excise tax of $1. What happens to the equilibrium price, market quantity, and total surplus in this case?

3. Suppose there are ten identical firms in an industry. The cost function for each firm is: 1 c(y) = y² + wy where y is the firm's output of the homogenous good, and where w is the wage rate of workers in the industry. Suppose further that w = 1.9Qs, where Qs denotes total industry output. (a) Find the industry supply function assuming symmetry. (b) Suppose market demand is QD = 6 p, where p is the output price. Find the price, market quantity, wage rate, and total surplus in equilibrium. (c) Now suppose that the government imposes a unit excise tax of $1. What happens to the equilibrium price, market quantity, and total surplus in this case?

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter11: Profit Maximization

Section: Chapter Questions

Problem 11.12P

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