Question

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, and total surplus
under parts A), B) and C). Are producers or consumers better off
under either form of government intervention? How do you know?

Answer #1

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)...

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QS = 35P – 39.75 and
QD = 10.25 – 5P, where P is
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b. If the government imposes a $0.50 tax per bottle, what are
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c. What is the deadweight loss from the tax? How much revenue
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Suppose the corn market has the following equations: QD = 3000 -
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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.
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Qd = 6 – 2P
Qs = P
Price is in dollars; quantity is in widgets.
For parts (a) and (b), assume there is no tax. Show your work
for each step below.
Find the equilibrium price and quantity algebraically.
Calculate the following:
consumer surplus
producer surplus
total firm revenue
production costs
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Qd = 240 - 5P
Qs = P
(a) Where Qd is the quantity demanded, Qs is the quantity
supplied and P is the Price. Find:
(1) the Equilibrium Price before the tax
(2) the Equilibrium quantity before the tax
(3) buyers reservation price
(4) sellers reservation price
(5) consumer's surplus before tax
(6) producer's surplus before tax
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per unit on seller's in the market.
Determine:
(1) Demand...

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