1. Following Niskanen’s model, assume that bureaucrats maximize the size of the budget under
their control. The bureau is budget-constraint in the sense that its cost cannot exceed its budget.
The sum of the citizens’ marginal valuations of the services of the bureau is written as MSB =100 – 4Q. The marginal cost of producing the services of the bureau is written as MC = 30 + 6Q.
a) Find out the equilibrium output and the corresponding budget.
b) Compare the equilibrium with the socially efficient outcome. 2.Suppose that a foreign firm with monopoly power exports its product to Canada. That is, the
firm is the only source of the product for Canadian consumers.
Canada’s market demand curve for the product is P = 80 – Q.Assume that the firm’s total cost function is TC(Q) = 20Q
Suppose that Canada decides to impose a tariff,
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