economics assignment

INTERMEDIATE ECONOMICS (ECON 021)

Homework 3

July/25/2020

STUDENT NAME: …………………………………………………. SCORE………/15

15 Marks

>Li Xiao Heng has been operating a multi-store for years 10 years. What is the effect of a lump-sum franchise tax ℒ on the quantity at which the firm’s after-tax average cost curve reaches its minimum? (Assume that the firm’s before-tax average cost curve is U-shaped.) Provide detailed answer as much as possible. Ensure to draw the relevant graph and properly place curves on it.

>What is the effect on the short-run equilibrium of a specific tax of t per unit that is collected from all n firms in the smart phone market? What is the incidence of the tax? (Remember to draw relevant graphs to illustrate your answer.

1. Show how the tax shifts a typical firm’s marginal cost and average cost curves and hence its supply curve.

2. Show how the market supply curve shifts.

3. Determine how the short-run market equilibrium changes.

4. Discuss the incidence of the tax.