In the Managerial Solution, would it make a difference to the analysis whether the lump-sum costs such as registration fees are collected annually or only once when the firm starts operation? How would each of these franchise taxes affect the firm’s long-run supply curve? Explain your answer.
Answer to relevant QuestionsGive an answer to the Managerial Problem for the short run rather than for the long run.For the monopoly in figure at what quantity is its revenue maximized? Why is revenue maximized at a larger quantity than profit? Modify panel b of figure to show the revenue curve.The inverse demand function a monopoly faces is p = 10Q–0.5. The firm’s cost curve is C(Q) = 5Q. What is the profit-maximizing solution? What is the effect of a lump-sum tax (which is like an additional fixed cost) on a monopoly? A monopoly’s inverse demand function is p = Q–0.25 A0.5, where Q is its quantity, p is its price, and A is the level of advertising. Its constant marginal and average cost of production is 6, and its cost of a unit of ...
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