Question

Suppose the weekly demand for a certain good in thousands of units, is given by the equation P = 35 - Q, and the weekly supply curve of the good by the equation P = 15 + Q where P is the price in dollars. Finally, suppose a per-unit tax of $6, to be collected from sellers is imposed in this market. Complete the following questions. Note: If necessary round your answers to two decimal places.

**a)** Graph the weekly demand, supply (pre-tax),
and supply (post-tax) equations.

**b)** What is the equilibrium price before the
tax?

Equilibrium Price = $0

**c)** What is the Consumer and Producer Surplus
before the tax?

**Note:** Remember that the quantity of units on the
graph are in thousands.

Producer Surplus = $0Consumer Surplus = $0

**d)** What is the new Consumer and Producer
surplus after the tax is imposed?

**Note:** Remember that the quantity of units on the
graph are in thousands.

Producer Surplus = $0Consumer Surplus = $0

**e)** How much government revenue will this tax
generate a week?

**Note:** Remember that the quantity of units on the
graph are in thousands.

Government Revenue = $0 per week

Answer #1

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function remains: P = Q.
Calculate the new equilibrium price and quantity. c.
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