Problem
Dinesh runs a factory that produces heavy machinery in Kerala, India. Demand for his machines is Q = 600 - P per year and marginal cost is $100. (All price are in thousands; you can ignore this information.) Unfortunately, if Dinesh produces more than 200 units per year, he will be employing more than 100 workers, and he will be subject to more taxes and legal constraints. He estimates that if he produces more than 200 units, his costs will jump to $160 per unit (for the units above 200).
i. How many units does he decide to produce?
ii. Now suppose Dinesh will also have to pay an extra "large firm" tax of $5000 per year (as well as a cost of $160 per unit for the units above 200). How does your answer change? How many units does he decide to produce?