5. There are n firms in a competitive industry. The market demand function is given by p = 10 – Q. A firm's cost function is c(q) = a. The government provides a proportional subsidy rate s > 0 for firms to help them get through the difficult time of a pandemic. That is, the firm earns (1+ s) p for each unit of goods sold. Show that the the total surplus strictly increases with s.

Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter9: Monopoly
Section: Chapter Questions
Problem 31P: Return to Figure 9.2. Suppose P0 is 10 and P1 is 11. Suppose a new firm with the same LRAC curve as...
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5. There are n firms in a competitive industry. The market demand function is given
by p
proportional subsidy rate s > 0 for firms to help them get through the difficult time
of a pandemic. That is, the firm earns (1+ s)p for each unit of goods sold. Show
that the the total surplus strictly increases with s.
10 – Q. A firm's cost function is c(q) = ;q². The government provides a
Transcribed Image Text:5. There are n firms in a competitive industry. The market demand function is given by p proportional subsidy rate s > 0 for firms to help them get through the difficult time of a pandemic. That is, the firm earns (1+ s)p for each unit of goods sold. Show that the the total surplus strictly increases with s. 10 – Q. A firm's cost function is c(q) = ;q². The government provides a
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