Question

Problem Instructions Description: oblem, you will calculate the costs and profits in two different situations with a specific tax and without it. Also, you will determine whe Perform: Instructions 1 Start Excel 2 In cell D16, by using relative and absolute cell references, calculate the price for the output in cell C16. Copy the formula from cell D 3 In cell E16, by using cell references, calculate the price elasticity of demand for the output in cell C16. Copy the formula from cell EI 4 In cell F16, by using cell references, calculate the revenue for the output in cell C16 and the price in cell D16. Copy the formula from slin cell G16, by using relative and absolute cell references, calculate the marginal revenue for the output in cell C16. Copy the formula 6 In cell H16, by using relative and absolute cell references, calculate the cost for the output in cell C16. Copy the formula from cell H1 7 in cell 116, by using relative and absolute cell references, calculate the marginal cost for the output in cell C16. Copy the formula from 8 In cell J16, by using cell references, calculate the profit for the output in cell C16. Copy the formula from cell J16 down the column to 9 In cell G32, by using a cell reference, enter the profit-maximizing output olin sell L32. by using a cell reference, enter the price corresponding to the profit maximizing output nilin sell H33, by using a cell reference, enter the maximum profit. 12 In cell E35, by using cell references, calculate the Lerner index for the profit-maximizing output 13 In cell L.37, by using a cell reference, enter the price clasticity of demand corresponding to the profit maximizing output 14 In cell F38, determine the relationship between the Lemner index and the price elasticity of demand. In cell K16, by using relative and absolute cell references, calculate the cost for the output in cell C16 if there is a specific tax of $20. cell 30. In cell L16, by using relative and absolute cell references, calculate the marginal cost for the output in cell C16 if there is a specific tax column to cell L30. 17 In cell M16, by using cell references, calculate the profit for the output in cell C16 if there is a specific tax of $20. Copy the formula 18 In cell L40, by using a cell reference, enter the new profit-maximizing output if there is a specific tax of S20 19 In cell F41, by using a cell reference, enter the price corresponding to the profit-maximizing output if there is a specific tax of S20. 20 In cell K41, by using a cell reference, enter the maximum profit if there is a specific tax of S20 21 Save the workbook. Close the workbook and then exit Excel. Submit the workbook as directed

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Answer 1

The calculated values for all the columns are shown in the top table and the formula view of the calculations are shown in the table below.

A E | B P C Elasticity -49.00 F c1 | | G MCI K Profit 2 | 15 J MC2 36 42 1 98 16 | ਕਲਾਸ -24.00} 63| 82 H Profit 1 35 110 175 230 275 2 I C2 83| 122 167 218 275 338 107 ਸਿਛਲਸ 310 407 ਵਿਚ ਸ਼ D R 98 192 282 368 450| 528 | 602 672 738 800 | 858 912 962 1008 1050 -15.67 -11.50 -9.00 -7.33 -6.14 -5.25 -4.56 -4.00 -3.55 -3.17 -2.85 -2.57 -2.33 c94 138 | 175 218 267 322 383 450 523 602 | 687 778 150 175 190 195 190 175 150 482 563 650 335 350 355 350 335 310 275 230 175 90 96 | 102 108 88 743 | 842 947 1058 1175 | ਹਿਰ 114 120 15 875} 10o| | -125

A B C D E G 1 Q P Elasticity R MR ci MCI 2 1 =100-2*A2 =-0.5*B2/A2 =A2*B2 =100-4*A2 1=50+10*A2+3*A2*A2 =10+6*A2 3 2 =100-2*A3|=-0.5*B3/A3 =A3*B3 =100-4*A3 =50+10*A3+3*A3*A3 =10+6*A3 4 3 =100-2*A4 =-0.5*B4/A4 |=A4*B4 =100-4*A4 1=50+10*A4+3*A4*14 =10+6*A4 5 4 =100-2*A5 =-0.5*B5/A5 =A5*B5 =100-4*A5 =50+10*A5+3*A5*A5 =10+6*A5 6 5 =100-2*A6 1=-0.5*B6/A6 =A6*B6 =100-4*A6 1=50+10*A6+3*A6*A6 =10+6*A6 76 =100-2*A7 =-0.5*B7/A7 =A7*B7 =100-4*A7 =50+10*A7+3*A7*A7 =10+6*A7 8 7 1=100-2*A8 ]=-0.5*B8/A8 =A8*B8 =100-4*A8 1=50+10*A8+3*A8*A8 =10+6*A8 9 8 1=100-2*A91=-0.5*B9/A9 |=A9*B9 =100-4*A9 1=50+10*A9+3*A9*A9 =10+6*A9 10 9 =100-2*A10 =-0.5*B10/A10 =A10*B10 =100-4*A10 =50+10*A10+3*A10*A10 =10+6*A10 11 10 =100-2*A11 =-0.5*B11/A11 =A11*B11 =100-4*A11 =50+10*A11+3*A11*A11 =10+6*A11 12 11 =100-2*A12 =-0.5*B12/A12 =A12*B12 =100-4*A12 =50+10*A12+3*A12*A12 =10+6*A12 13 12 1=100-2*A13 =-0.5*B13/A13 =A13*B13 =100-4*A13 =50+10*A13+3*A13*A13 =10+6*A13 14 13 =100-2*A14 =-0.5*B14/A14 =A14*B14 =100-4*A14 =50+10*A14+3*A14*A14 =10+6*A14 15 14 =100-2*A15 |--0.5*B15/A15 =A15*B15 =100-4*A15 =50+10*A15+3*A15*A15 =10+6*A15 16 15 =100-2*A16 --0.5*B16/A16 =A16*B16 =100-4*A16 =50+10*A16+3*A16*A16 =10+6*A16 H J K Profit 1 C2 MC2 Profit 2 =D2-F2 =50+30*A2+3*A2*A2 =30+6*A2 =D2-12 =D3-F3 =50+30*A3+3*A3*A3 =30+6*A3 =D3-13 =D4-F4 =50+30*A4+3*A4*A4 =30+6*A4 =D4-14 =D5-F5 =50+30*A5+3*A5*A5 =30+6*A5 =D5-15 =D6-F6 =50+30*A6+3*A6*A6 =30+6*A6 =D6-16 =D7-F7 =50+30*A7+3*A7*A7 =30+6*A7 =D7-17 =D8-F8 =50+30*A8+3*A8*A8 1=30+6*A8 |=D8-18 =D9-F9 =50+30*A9+3*A9*A9 =30+6*A9 =D9-19 =D10-F10 =50+30*A10+3*A10*A10 =30+6*A10 =D10-110 =D11-F11 =50+30*A11+3*A11*A11 =30+6*A11 =D11-111 =D12-F12 =50+30*A12+3*A12*A12 =30+6*A12 =D12-112 =D13-F13 =50+30*A13+3*A13*A13 =30+6*A13 =D13-113 =D14-F14 =50+30*A14+3*A14*A14 =30+6*A14 =D14-114 =D15-F15 =50+30*A15+3*A15*A15 =30+6*A15 =D15-115 =D16-F16 =50+30*A16+3*A16*A16 =30+6*A16 =D16-116

(a) The optimal output, where MR=MC is 9 units. The corresponding price is 82. At this output, profit reaches its maximum level of 355.

(b) Lerner index is 0.22 (upto 2 decimal points).

The price elasticity of demand at the profit maximizing output-price combination is -4.56. Thus, the Lerner index is the reciprocal of absolute value of the price elasticity of demand.

P-MC 1 Lerner Index= 2 ore

(c) After a specific tax is imposed on the monopoly the profit-maximizing output is 7. The corresponding price is 86. The posi-tax optimal profit = 195.