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)) 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 would receive 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 QM for the firm. What is the impact of the tax on the MR of the firm?

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)) 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 would receive 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 QM for the firm. What is the impact of the tax on the MR of the firm?

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter23: Monopoly

Section: Chapter Questions

Problem 4QP: Is there a deadweight loss if a firm produces the quantity of output at which price equals marginal...

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