1. John has been in the habit of mowing Willa\'s lawn each week for $20. John\"s
ID: 1178185 • Letter: 1
Question
1. John has been in the habit of mowing Willa's lawn each week for $20.
John"s opportunity cost is $15, and Willa would be wlling to pay $25 to have her lawn mowed.
What is the maximum tax the gov. can impose on lawn mowing
without dicouraging John and Willa from cotinuing their matually beneficial arrangement?
2. Explain how a firm in a competitive market identifies the profit-maximizing level of production. When should the firm raise production, and when should the firm lower prodcution?
3. solve for equilibrium price and quantity. What does how you?
Qd=400-(2P+T), Qs=100+3P. and T=15. (P is the price recieved by sellers and P+T is the price paid by buyer)
Please sove these problems. Actually i could find the solution from internet like yahoo answer or some websites...
.but I'd like you to teach me more more more about that in detail so that i can finaly understand the concept completely.
Explanation / Answer
If the tax is less than $10, there will be a price at which both John and Willa will still benefit from the lawn-mowing arrangement. If the tax is $10, a price can be set that will leave John and Willa neither better off nor worse off from the lawn-mowing arrangement. If the tax is greater than $10, all possible prices will leave at least one of the parties worse off from the lawn-mowing arrangement.
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by selecting the level of output at which marginal revenue is equal to marginal cost. If MR > MC, profit will increase if the firm increases Q. If MR < MC, profit will increase if the firm decreases Q.
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Prior to the tax , the equilibrium price would be 60 dollars and equilibrium quantity would be 280 dollars .after the tax imposed P , the price received but sellers would be 57 dollars . the price paid by the buyers would be 72 dollars . the quantity sold would be 271 dollars. The new answer shows three oblivious facts . First buyers pay more with a tax . Second sellers receive less with a tax . thord the size of the market shrinks when a tax is imposed on a product
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