I'm currently working on a problem that says the following :

At first we had a number N of firms in perfectly competitive industry,the exercice gives us the total cost and the Market Demand with p as the market price . After studying this case ( Consumer surplus, market equilibrum and firm profit ) the exercice adds the following :"The government decides that each firm in the industry must pay a license fee of 12 per period, whether they produce an output or not " and from this we should find the market price and what output maximizes firm profit and level of firm profit. I don't know how to interpret the license fee, is it a tax? the only exercises i've seen so far are with a per unit tax applied to the producer .

  • $\begingroup$ Hint: the license fee is definitely a cost. Since the fee is irrespective of quantities produced, think about the type of cost that is also irrespective of quantities. What cost is that? $\endgroup$
    – Herr K.
    Jan 19, 2019 at 18:34
  • $\begingroup$ Fixed cost? but the exercice only gives us the total cost formula, no mention of a variable cost.So I have just to add this "licensee fee" to the total cost and calculate the market place and all? $\endgroup$
    – HibaO
    Jan 19, 2019 at 18:44


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