h9_ans - 1000 D S Q 14 22 10 P 2 (c) Producer surplus is...

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1 The Colorado College Department of Economics and Business Block 7 Econ 207 HW 9 ans. 1. (a) SMC = d(STC)/dq = q + 10. For supply, set P = SMC. P = q + 10 q = P – 10 100 firms in industry, so industry supply curve is Q = 100q = 100P – 1,000 . (b) For equilibrium, set Q D = Q S . 1,100 – 50P = 100P – 1,000 P = 14, Q = 400, Profit = TR – TC = 4(14) – (8 + 40 + 5) = 3 . Industry profit = 100(3) = 300 . (c) The graph shows supply-demand equilibrium. Consumer surplus is .5(22 – 14)(400) = 1,600 . Producer surplus is .5 (14 – 10)(400) = 800 . Total surplus is 2,400. 2. (a) New equilibrium is found as: 100 1000 1100 50( 3) Q P P = - = - + 13 3 16 300 P P Q = + = = (b) Total taxes are 900 Consumers pay (16 – 14)(300) = 600 Producers pay (14 – 13)(300) = 300
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Unformatted text preview: 1000 D S Q 14 22 10 P 2 (c) Producer surplus is now 0.5(13 10)(300) = 450 3. (a) Set quantity supplied equal to quantity demanded 150P = 5,000 100P; P = 20, Q = 3,000. (b) P will fall to 10. Q D = 4,000 , Q S = 1,500 . 2,500 radios will be imported. With free trade, consumer surplus is .5(50 10)(4,000) = 80,000 . Domestic producer surplus is .5(10)(1,500) = 7,500 . (c) Price would now rise to 10+5 = 15 . Q D = 3,500 , Q S = 2,250 . Tariff revenue is 5(1,250) = 6,250 . With the tariff, consumer surplus is .5(50 15)(3,500) = 61,250, a loss of 18,750 . Producer surplus is now .5(15)(2,250) = 16,875, a gain of 9,375 . 1000 D S Q 14 10 13 16 22 20 2250 3500 1000 4000 10 15 Q P 50...
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h9_ans - 1000 D S Q 14 22 10 P 2 (c) Producer surplus is...

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