Question

Suppose the market for soda is represented by the following
supply and demand equations:

*Q**S* = 35*P* – 39.75 and
*Q**D* = 10.25 – 5*P,* where *P* is
price per bottle and *Q* measures bottles per second.

a. What are the value of consumer and producer surplus?

b. If the government imposes a $0.50 tax per bottle, what are the value of consumer and producer surplus?

c. What is the deadweight loss from the tax? How much revenue does the tax yield?

Answer #1

From the supply and demand equations, we find the current equilibrium

QS = QD

35P – 39.75 = 10.25 – 5P

40P = 50

P = 1.25 and Q = 10.25 - 5*1.25 = 4 units.

a) CS = 0.5*(max price - current price)*qty = 0.5*(2.05 - 1.25)*4 = 1.6.

PS = 0.5*(current price - minimum price)*qty = 0.5*(1.25 - 1.13)*4 = 0.228

b) A tax shifts the demand functions leftwards

QS = QD

35P – 39.75 = 10.25 – 5(P+0.5)

35P - 39.75 = 10.25 - 5P - 2.5

40P = 47.5

P = 1.1875 (sellers receive) and Q = 35*1.1875 - 39.75 = 1.8125 units.

Price that buyers pay = 1.1875 + 0.5 = $1.6875

CS = 0.5*(2.05 - 1.6875)*1.8125 = $0.328516

PS = 0.5*(1.6875 - 1.13)*1.8125 = $0.505234

c) DWL = 0.5*tax*qty change = 0.5*0.50*(4 - 1.8125) = 0.546875

Revenue = tax * quantity = 0.50*1.8125 = 0.90625

Suppose a market is characterized by the following supply and
demand equations:
QD=1,000-5P
QS=-500+10P
1.)Determine equilibrium price and quantity.
2.)Suppose that the government taxes production such that for every
unit produced, sellers must pay the government $10. Determine the
new equilibrium price(s) and quantity.
3.)Suppose that instead of taxes, the government imposes a price
floor such that the minimum amount the good can be sold for is
$150. Determine the new equilibrium price and quantity.
4.)Determine producer surplus, consumer surplus,...

The demand and supply for Fuji apples are given by
QD = 17,500 - 25 P and
QS = 10 P, where P is price
per pound and Q is pounds of apples. What is the consumer
surplus and producer surplus at the equilibrium?
A.
CS = $500,000; PS = $1,250,000
B.
CS = $750,000; PS = $1,250,000
C.
CS = $500,000; PS = $750,000
D.
CS = $1,250,000; PS = $500,000
The market for plywood is characterized by the...

2. Suppose a market is characterized by the following
supply and demand equations:
QD=1,000-5P
QS=-500+10P
A) Determine equilibrium price and quantity.
B) Suppose that the government taxes production such that for
every unit produced, sellers must pay the government $10. Determine
the new equilibrium price(s) and quantity.
C) Suppose that instead of taxes, the government imposes a price
floor such that the minimum amount the good can be sold for is
$150. Determine the new equilibrium price and quantity.
D)...

Suppose that a market is described by the following supply and
demand equations:
QS = 2P
QD = 400 - 3P
Suppose that a tax of T is placed on buyers, so the new demand
equation is
QD = 400 – 3(P+T)
Solve for the new equilibrium. What happens to the price
received by sellers, the price paid by buyers, and the quantity
sold?
Tax revenue is T x Q. Use your answer from part (b) to solve for
tax...

the following demand and supply curves:
QD = 80,000 - 2,000P and QS = -25,000 + 5,000P
3.
What is the consumer surplus in this example of supply and
demand?
What is the producer surplus in this example?
How much are the variable costs to the firm in this example?
4.
Suppose the government were to impose a price ceiling of $10 on
the sale of
each unit sold in this market.
Is there a shortage or a surplus? By...

Suppose the demand curve for a good is Q =9 −pand the supply
curve is Q =2p. The government imposes a specific tax of =1 per
unit. What would be the equilibrium? What effect does the tax have
on consumer surplus, producer surplus and deadweight loss?

Assume that supply and demand are given by the equations:
QS = 500P QD = 3600 – 1000P
A $0.60 per unit tax imposed on sellers in this market.
Sketch a graph showing values for equilibrium price and quantity
before the tax, the effect of the tax on supply, and the effect of
the tax on the price paid by consumers, the price retained by
sellers, and the quantity bought and sold. Show all of these values
in your graph....

Consider the market for butter in
Saudi Arabia. The demand and supply relations are given as
follows:
Demand:
QD = 12 - 2P
Supply:
Qs = 3P - 3.
P is the price of butter.
Calculate:
Equilibrium price _____________
2. Equilibrium quantity _____________
Consumer surplus
___________
4. Producer surplus ___________
Draw the demand and supply graphs. Show the equilibrium price
and quantity, consumer surplus and producer surplus in the graph
below. Graphs must be on scale.
Suppose government imposes...

4. Suppose the domestic supply and demand curves for petroleum
in the U.S. are, Qs = 10P - 300 Qd = 3000 - 20P Let the world trade
price be $50 per barrel. 1) What is the equilibrium quantity of
imports? 2) Suppose a specific tariff of $10 per barrel is imposed.
Calculate Consumer surplus, producer surplus, and tariff revenue.
3) Suppose the government imposes an import quota of 1200 units of
barrels. Find the trading price for petroleum.

The domestic market supply function is QS = 25 + 5P,
and the domestic market demand function is
QD = 200 − 5P. The world
price is 20.
a) Carefully draw the graph for this market.
(Label the axes and curves.)
b) Is this country importing or exporting the commodity?
Calculate how much. ______________
c) Calculate the consumer surplus _________ and producer surplus
________ for this country.
Just need Part B and C. Thank you!

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 11 minutes ago

asked 58 minutes ago

asked 58 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago

asked 2 hours ago