Consider an oligopolistic market with two firms. Each of them produces using a cost function given by c(q)=q^2.

Question

The aggregate demand in the market is given by 1000−p.

Suppose that, in order to increase production, the government gives the firms a $100 per-unit produced subsidy. The cost of the subsidy is financed with an identical lump-sum tax on consumers.

QUESTION: What is the total level of production in the market?

Consider the same setting as in the previous question.

Suppose that firms are NOT owned by consumers.

Let s denote the size of the per-unit subsidy/tax given to the firms. Let positive values of s denote subsidies, and negative values of s denote taxes.

QUESTION: What is the value of s that maximizes total consumer well-being? (Note: Don't forget to add the sign in entering your answer, if necessary).

Answer 1

First question: Q=440 and P=660.

Second question: s=100

Answer 2

Wrong!!!

Answer 3

second: -300

Answer 4

WRONG s is not -300

Answer 5

If Q = 440, shouldn't P = 560?

Answer 6

Yes, they are right! Have you the answers of question 5,6,7? Thanks very very much!