Suppose a monopolist faces a demand curve P = 60 – 3Q. Marginal cost is constant...
Suppose a monopolist faces a demand curve P = 60 – 3Q. Marginal cost is constant and equal to 6 (MC = 6). If a per-unit excise tax, t = $9 per unit is levied on consumers, how much will consumers pay for each unit of the good after the tax?
Homework Answers
Ans.
MC after imposition of tax = 6+t
= 6+9
MC = 15
TR = ( 60 - 3Q) Q
MR = 60 - 6Q
Profit Maximisation at point
MR = MC
60 - 6Q = 15
6Q = 45
Q = 7.5
P = 60 - 3(7.5)
P = 60 - 22.5
P = 37.5
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