A firm faces the following average revenue (demand) curve: P 120 0.02Q where Q is
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P 120 0.02Q
where Q is weekly production and P is price, measured in cents per unit. The firm’s cost function is given by C 60Q 25,000. Assume that the firm maximizes profits.
a. What is the level of production, price, and total profit per week?
b. If the government decides to levy a tax of 14 cents per unit on this product, what will be the new level of production, price, and profit?
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a The profitmaximizing output is found by setting marginal revenue equal to marginal cost Given a linear demand curve in inverse form P 120 002Q we kn...View the full answer
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