PROBLEM SET NO. 4

Problem Set No. 4

Problem Set No. 4

Answer No. 1

Answer No. 2

PMB = SMC

And, SMC = PMC + MD

Thus, PMB = PMC + MD

360 - 4Q = 6Q + 2Q

360 - 4Q = 8Q

360 = 8Q + 4Q

360 = 12Q

Q = 360/ 12

Q = 30

Moreover,

360 - 4Q = 6Q + T

As Q = 30, thus,

T = 60

Therefore, tax of 60 will achieve the socially optimal level of output.

Answer No. 3

1200 - 4P = -200 + 2P

1400 = 6P

P = 1400/ 6

P = 233.333

Thus,

Q = 1200 - 4 (233.333)

Q = 1200 - 933.333

Q = 266.667

Solving for P:

1200 - ...