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DSE 2016 doubt

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DSE 2016 doubt

ecom
24 posts
Can anybody please help with questions 18 and 21 from the 2016 paper please :)
18 is stupid doubt, i know. But i'm stuck on it :(
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Re: DSE 2016 doubt

ecom
24 posts
can anybody please look at it ? even a little hint would do :)

https://drive.google.com/file/d/0BxhFRl3pdvlLZnl0SUZvNDQ1R0U/view 
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Re: DSE 2016 doubt

vishp
48 posts
In reply to this post by ecom
Ans-18
c(q)=(1/2)(q^2)
Firm's supply- P=MC--> P=q
There are 10 identical firms. so, Industry's supply= Q=10*q=10P
Total Industry's demand Q=100-10P.
At equilibrium, Demand=Supply---> 100-10P=10P----> P*=5
Now Government imposes an excise tax of Rs.2 per unit, to be paid by sellers. This tax is passed on to consumers. suppose consumers paying price per unit= Pd and suppliers earn per unit is Ps,
Suppliers passes this extra tax on consumer so Pd=Ps+2, and Ps=Pd-2
At Ps, supply from industry  is Q=10Ps= 10(Pd-2)
At Pd, Demand from consumers is Q=100-10Pd.
At equilibrium, 10(pd-2)=100-10Pd.----> Pd*=6
Now equilibrium price is what demanders pay per unit that is market price per unit.
So answer is (B) 6.
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Re: DSE 2016 doubt

Ds12shr
15 posts
In reply to this post by ecom
Hey,for 18th I am attaching the image, but I am unable to do it. Should I mail it to you?
And for the 21st see basically government is trying to discourage the use of capital. Because it's a negative externality for the second firm(capital used by firm 1 appears in the denominator in the production function for firm2)
So for discouraging the use of capital taxing it makes sense ,which means the other input labour needs to subsidized because now it will be subsituted for capital also.
Also merging of both firms leads to socially efficient outcome, because (internalisation of externality concept)
So d)All of the above.
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Re: DSE 2016 doubt

ecom
24 posts
Thank you sooo much vishp and Ds12shr :)
Makes sense now