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practice_questions_for_exam_2 - PRACTICE QUESTIONS FOR EXAM...

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PRACTICE QUESTIONS FOR EXAM 2 (1) The demand equation is Q = 50 – 0.5 P , and the supply equation is Q =(P/3) . (a) Initially there is no tax. Find the following: Equilibrium Quantity, Equilibrium Price, Consumer Surplus, Producer Surplus, and Total Surplus. (b) A tax of $25 is levied on the good. Find the following: Equilibrium Quantity, Price Paid by the Consumer, Price Received by the Seller, Consumer’s Burden of the Tax, Seller’s Burden of the Tax, Tax Revenue, Consumer Surplus, Producer Surplus, Total Surplus, and Deadweight Loss. NOTE : Total Surplus = Consumer Surplus + Producer Surplus + Tax Revenue. (2) The domestic supply and demand equations for hula beans in the U.S. are given by Q = P 50 and Q = 100 – (P/2) respectively, where P is the price in cents per pound and Q is the quantity in pounds. The U.S. is a small producer in the world hula bean market, where the current price (which will not be affected by anything the U.S. does) is 60 cents per pound . Congress is considering a tariff of 20 cents per pound .
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