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The long-run cost function for LeAnn's telecommunication firm is: C(q)=0.03q2. A local telecommunication tax of $0.01 has...

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Economics

  1. The long-run cost function for LeAnn's telecommunication firmis: C(q)=0.03q2. A local telecommunication tax of $0.01has been implemented for each unit LeAnn sells. This implies themarginal cost function becomes: MC(q,t)=0.06q+t
    1. If LeAnn can sell all the units she produces at the marketprice of $0.70, calculate LeAnn's optimal output before and afterthe tax.
    2. What effect did the tax have on LeAnn's output level?
    3. How did LeAnn's profits change?

Answer & Explanation Solved by verified expert
4.4 Ratings (906 Votes)
acq 003q2MC 006qSince fim can sell itsoutput at market price thus optimal output is givenbyP MC070 006qq    See Answer
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