Study Guide for Microeconomics
9th Edition
ISBN: 9780134741123
Author: Robert Pindyck, Daniel Rubinfeld
Publisher: PEARSON
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Question
Chapter 8, Problem 15E
(a)
To determine
Identify the price of the product, the output of firms, and industry output.
(b)
To determine
Identify the role of tax-subsidy policy on the budget.
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Consider a perfectly newspaper market with identical firms, each with the usual shaped cost curves.
(1) The government imposes a (permanent) $2 per-newspaper subsidy on the market. What is the impact of the subsidy on the newspaper market? Make sure to distinguish between the short-run and the long-run impacts.
(2) If demand permanently decreases, what is the impact on the newspaper market? Make sure to distinguish between the short-run and the long-run impacts.
Consider a competitive firm with a short-run cost function C(q) = 100q−q2 + 1/5q3 +450.
(a) Suppose that the market price is $205. Find the optimal output. Find the profit or loss at the optimal output. Will the firm stay or shutdown? Why?
(b) Suppose that the market price is $105. Find the optimal output. Find the profit or loss at the optimal output. Will the firm stay or shutdown? Why?
(c) Suppose that the market price is $205 and there is a tax of $65 per unit produced. Find the optimal output. Find the profit or loss at the optimal output. Will the firm stay or shutdown? Why?
What is the effect on the short-run equilibrium of a specific subsidy of s per unit that is given to all n firms in a market?
Chapter 8 Solutions
Study Guide for Microeconomics
Ch. 8 - Prob. 1RQCh. 8 - Prob. 2RQCh. 8 - Prob. 3RQCh. 8 - Prob. 4RQCh. 8 - Prob. 5RQCh. 8 - Prob. 6RQCh. 8 - Prob. 7RQCh. 8 - Prob. 8RQCh. 8 - Prob. 9RQCh. 8 - Prob. 10RQ
Ch. 8 - Prob. 11RQCh. 8 - Prob. 12RQCh. 8 - Prob. 13RQCh. 8 - Prob. 14RQCh. 8 - Prob. 1ECh. 8 - Prob. 2ECh. 8 - Prob. 3ECh. 8 - Suppose you are the manager of a watchmaking firm...Ch. 8 - Prob. 5ECh. 8 - Prob. 6ECh. 8 - Prob. 7ECh. 8 - Prob. 8ECh. 8 - Prob. 9ECh. 8 - Prob. 10ECh. 8 - Prob. 11ECh. 8 - Prob. 12ECh. 8 - Prob. 13ECh. 8 - A sales tax of 1 per unit of output is placed on a...Ch. 8 - Prob. 15E
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