Explore BrainMass
Share

Explore BrainMass

    Equilibrium price and quantity and governmnet subsidy

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    For Firm Y:

    Use the demand function: P = 30 - 2Q
    And the marginal cost function: MC = 20 to determine P and Q for profit maximization.

    Then, suppose a government subsidy of $6 per unit is imposed.

    What does the firm do with respect to price and quantity?

    © BrainMass Inc. brainmass.com October 9, 2019, 10:06 pm ad1c9bdddf
    https://brainmass.com/economics/general-equilibrium/equilibrium-price-and-quantity-and-governmnet-subsidy-208303

    Solution Preview

    For profit maximization, we have MR=MC
    TR=P*Q=30Q-2Q^2
    MR=dTR/dQ=30-4Q
    MC=20
    Equating MR=MC we ...

    Solution Summary

    Shows how to calculate the equilibrium price and quantity and how it can be affected by governmnet subsidy.

    $2.19