Question

Suppose that a market has the following demand and supply functions (normal): Qd = 10-P and Qs = 2P-2.

If the government imposed a $3/unit excise tax on producers in this market, what would be the value of producer surplus?

If the government imposed a $3/unit excise tax on producers in this market, what would be the value of consumer surplus?

If the government imposed a $3/unit excise tax on producers in this market, what would be the DWL?

If the government imposed a $3/unit excise tax on producers in this market, what would be the new price that producers receive?

Answer #1

1. Subsidy. The market demand and supply
functions for cotton are: Qd = 10 - .04P and Qs = 38P - 20
a. Calculate the consumer and producer
surplus.
To assist cotton farmers, suppose a subsidy of $0.10 a unit is
implemented.
b. Calculate the new level of consumer
and producer surplus.
c. Did the increase in consumer
and producer surplus exceed the increased government spending
necessary to finance the subsidy?

The market demand and supply functions for milk are:
QD = 14 − 2P
and QS = − 1+P. If a price floor of
$6 is implemented, calculate the change in
producer surplus. How many surplus units of milk are being
produced? If the government purchases all the excess units at $6,
calculate the milk expenditures by government?

Suppose there is a market at its competitive equilibrium.
Demand p = 100 - QD
Supply p = 20 + (QS /3) The government introduces a subsidy of s
= $4 per unit of the good sold and bought.
(a) Draw the graph for the demand and supply before subsidy.
(b) What is the equilibrium price and quantity before the
subsidy and after the subsidy?
(c) Looking at the prices buyers pay and sellers receive after
the subsidy compared to...

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...

The demand and supply functions of a given competitive market
are provided as follows: Qd = 100 – 2P Qs = 70 + 3P You are
required to; (a) Find the equilibrium price and quantity sold. 7
marks (b) Assuming that the government of Ghana has imposed GH¢2.00
per unit tax on the good in the market. What will be the new
equilibrium price and quantity in the market? 11 marks

The demand and supply functions for rental accommodation in New
York are as
follows:
Qd = 120 - P
Qs = 2P
a. Solve for the competitive equilibrium rental rate (P) and
quantity (Q) of rental units
in New York. Illustrate this equilibrium in a graph.
b. On your graph, show the regions that represent consumer surplus
and producer
surplus. Calculate the value of consumer surplus, producer surplus,
and overall
welfare.
c. Suppose the City of New York enacts a...

Suppose the market for soda is represented by the following
supply and demand equations:
QS = 35P – 39.75 and
QD = 10.25 – 5P, 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...

Suppose that the Demand and Supply functions are : QD=800-4P
and QS=8P-160. The government imposes a per unit tax of $3. After
the tax, the supply equation becomes: QS=8P-184. (Hint: you really
should draw a graph for this question, as you did in the Extra
Credit)
Find Government Revenues and Deadweight Loss (DWL) AFTER the
tax
Select one:
a. Government Revenues = 1,416; DWL = 12
b. Government Revenues = 1,416; DWL = 8
c. Government Revenues = 1,440; DWL...

25) Recall the demand and supply equations: QD=20 -
2P and QS=3P.
(a) Suppose a $5 tax, T=5, has been levied on consumers: (i)
Compute the new demand curve (ii) Draw the new demand curve in
(a)
(b) Compute the DWL of the consumer and the producer after the
tax.
(c) Compute the tax revenue generated by the $5 tax.
(d) Compute the consumer surplus, CS1, after the $5
tax has been enforced.
(e) Compute the producer surplus, PS1, after...

Suppose that the (inverse) demand for Sugar in the US is given
by, P= 75-2 Qd
where P = price per bulk bag (in dollars) and Qd =
quantity demanded (in millions of bulk bags).
Suppose the (inverse) supply of sugar is given by, P= 3
Qs
where P = price per bulk bag (in dollars) and Qs =
quantity supplied (in millions of bulk bags).
a.) Find the equilibrium price and quantity of sugar exchanged
in the US market,...

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