Question

Tax Rate per Unit of Education MC A B S=MR D MB Education Output D XTY

1. In the figure above which letter refers to the efficient tax rate?

2.In the figure above, which letter refers to the tax rate set by a monopolist school district?

3.In the figure above, which letter refers to the education level provided by a monopolist school district?

4.In the figure above, which letter refers to the education level provided by a school district that acts like a perfectly competitive firm?

5.In the figure above, which letter or combination of letters refers to the dead weight loss from having a school district act like a monopolist?

Answer 1

1. Efficient dan rate is one, which maximises total welfare ie there is no deadweight do88. and total welfare is maximised sehen at a point where Price (tax rate) = Marginal cost. correct letter is B. So the Monopolist's objective is to maximise of a monopolist brofit. The equilibrium Ad gun Given by MR=MC je intersection of Mr and Mc cus

This intersection gives us the profit Maximising Quantity Maximising price and the profit by D-Come corresponding to the is found out given equilibrium point. Hence the tax rate Set by monopolist is given by letter 'A'. (3) Monopolist Equilibrium given by letter D. Quanlity s A perfectly competetive firm sets, Price (fan rate) = MC le intersection of D and Mc cwme determine equilibrium in care of perfect competition flence perfectly competeline beuel of education is given by letter E (5) Deadweight loss = coss in I consumer sublus Loss in producer Surplus, x ty