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The market for apples is perfectly competitive, with the market supply curve is given by P...

The market for apples is perfectly competitive, with the market supply curve is given by P = 1/8Q and the market demand curve is given by P = 40 – 1/2Q.

a. Find the equilibrium price and quantity, and calculate the resulting consumer surplus and producer surplus. Indicate the consumer surplus and producer surplus on the demand and supply diagram.

b. Suppose the government imposes a 10 dollars of sale tax on the consumer. What will the new market price and quantity be? How much deadweight loss will be created by this policy?

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