Caculating equilibrium price, output and consumer equilibrium under monopoly and perfect competition.
A perfectly competive industry is in long-run equilibriumand the equations for the demand supply cure are:
P0 =70-(1/5)Q0
Ps = 70-(1/5)Qs
Now a profit-maximizing monopolist buys out all of the firms in the industry and produces the industry output with the name cost structure.
1. Illustrate what was the perfectly competitive equilibrium price and output?
2. Illustrate what is the monopoly equilibrium price and output?
3.How much was consumer surplus at the Completive equilibrium?
4.How much is consumer surplus at the monopoly equilibrium?
The government decides that the monopolist is making excessive economic profits, product alternative ways of regulating the monopolist
(1)Place a lump-sun tax of $300 on the monopolist.
(2)Place a sales tax of $3 per unit on the monopoly good.
(3)Place a ceiling price of $40 per unit on the monopoly good.
5.Under which of the two tax scheme would the government collect the most taxes?
6. Which of the 3 alternatives would have the least harmful effect on consumers?
7.Which of the 3 alternatives would have the least harmful effect on monopolist?