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ECO101H1 (700)
Lecture 21

Lecture 21-Review Applications


Department
Economics
Course Code
ECO101H1
Professor
Jack Carr
Lecture
21

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Q1
Q0
P0
P1
DD
MR
$2
P0 falls to P1
Q0 falls to Q1
Tuesday, December 8th, 2009. Review: Applications
A monopolist is earning economic profits.
What happens to:
(1) Price
(2) Quantity
If Government removes $2 per unit excise tax?
Key: MC shifts down by $2
Price increase from P0 to P1
Output declines from Q0 to Q1
Why?
Q1
P1
DD
Q0
P0
Q0
SS
DD
SS1
SS
P0
NO CHANGE
Why?
Same no. of firms producing same
product
D[
MC
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