Question

A.1. a. Suppose the demand function P = 10 - Q, and the supply function is: P = Q, where P is price and Q is quantity. Calculate the equilibrium price and quantity.

b. Suppose government imposes per unit tax of $2 on consumers. The new demand function becomes: P = 8 – Q, while the supply function remains: P = Q.

Calculate the new equilibrium price and quantity. c. Based on (b), calculate the consumer surplus, producer surplus, tax revenue, total surplus and deadweight loss under the tax rate in (b). Also explain your answers in (c) diagrammatically.

Answer #1

Suppose that the demand equation: P = 6 – Q and supply equation:
P = Q.
a. Calculate the price elasticity of demand at
equilibrium.
b. Calculate the equilibrium price and quantity, and consumer
surplus and producer surplus.
c. Suppose government imposes a unit tax of $1 on producers. Derive
the new supply curve and also calculate the new equilibrium price
and quantity.
d. Calculate tax revenue and the deadweight loss of this tax.

Using the following information to calculate a)-n). Demand: P =
45- ½ Q Supply: P = 2Q
a) P*=_________
b) Q*=_________
c) Initial Consumer Surplus=__________
d) Initial Producer Surplus=__________
e) Total Surplus =_________________
Now the government imposes a $15 per unit tax on consumers.
Calculate the following.
f) Tax Distorted Competitive Equilibrium Quantity=_____
g) Price (consumers pay with tax)=________
h) Price (producers get with tax)=________
i) Consumer surplus with tax=_________
j) Producer surplus after tax=__________
k) Tax Revenue=_____________
l) Total...

Suppose that demand for chicken cesar salad can be expressed by
(the normal) demand function: Q=10-P. Further Suppose that the
(normal) supply function can be expressed: Q=2P-2.
Graph the Situation.
1. What is the initial equilibrium price?
2. What is the initial equilibrium quantity?
3. Suppose that a tax of $3/salad is levied on the producer.
What will be the new price paid by consumers after the tax?
4. What will be the new price received by the producer after...

The demand for skateboards in Vermillion is Q = 500−2P and the
supply curve is Q = 1/2 P. The government 2
decides to raise revenue by taxing consumers $25 for each
skateboard purchased.
(a) Graph the supply and demand curves and calculate the
consumer and producer surplus that would exist if there were no tax
in the market.
(b) Show how the tax will change the market equilibrium price
and quantity. Identify the price paid by consumers and the...

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...

Suppose that the demand curve for wheat is Q=100−10p and the
supply curve is Q=10p. The government imposes a price ceiling of
p=3
i) Describe how the equilibrium changes. ii) What effect does
this price ceiling have on consumer surplus, producer surplus, and
deadweight loss?

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?

Suppose that the demand curve for wheat is D(p) = 120 − 10p
and the supply curve is S(p) = 2p.
Compute the consumer and producer surplus at the equilibrium.
Indicate them on a clearly marked graph.
Assume that the government imposes a specific tax of $2.4 on
wheat, to be paid by the consumers. Compute the government revenue
and the deadweight loss generated by this tax.

1). The market demand function for a good is given by Q = D(p) =
800 − 50p. For each firm that produces the good the total cost
function is TC(Q) = 4Q+( Q2/2) . Recall that this means
that the marginal cost is MC(Q) = 4 + Q. Assume that firms are
price takers.
(a) What is the efficient scale of production and the minimum of
average cost for each firm?
Hint: Graph the average cost curve first.
(b)...

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

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