Please help solve part d, e, and f only. Thank you 5. Assume than a non-competitive firm faces a downward sloping firm demand curve, P(Q),and has the cost curve, C(Q)= cQ.Suppose that the government taxes firm profits at a rate of t (the firm keeps profits of (1-t)n)a) What will be the impact of the tax on the profit maximizing quantity of the firm?What will be the effect on the price charged?Suppose instead that the government imposes a tax on the price that the firm charges.Specifically if the firm is charging P(Q) then after the imposition of the tax, the firm wouldreceive only (1-t)P(Q) where t is the tax rate.b) Write the firm's profit function as a function of Q and t.c) Write the first order conditions that define the profit maximizing level of output QMfor the firm. What is the impact of the tax on the MR of the firm?For each tax rate t, a profit maximizing firm must choose a QM such that the first orderconditions hold. Thus the FOC define an implicit relationship between t and QM.d) Using the FOC find the derivativedQMdtof the implicitly defined relationshipbetween QM and t.Suppose that P(Q) = a - bQ.e) Show that you can write the derivative from part (b) asdQMdtC(1-1) 2bWhat isthe sign of this derivative?f) In a diagram illustrate the demand, marginal cost, and revenue curves. Include twoMR curves (before and after the tax) and indicate the profit maximizing quantitiesbefore and after the tax.

Profit maximization involves maximizing the difference between total revenue and total costs. It is…

5. Assume than a non-competitive firm faces a downward sloping firm demand curve, P(Q), and has the cost curve, C(Q)= cQ. Suppose that the government taxes firm profits at a rate of t (the firm keeps profits of (1-t)π) a) What will be the impact of the tax on the profit maximizing quantity of the firm? What will be the effect on the price charged?

5. Assume than a non-competitive firm faces a downward sloping firm demand curve, P(Q), and has the cost curve, C(Q)= cQ. Suppose that the government taxes firm profits at a rate of t (the firm keeps profits of (1-t)π) a) What will be the impact of the tax on the profit maximizing quantity of the firm? What will be the effect on the price charged?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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