Econ302-hw5-spring08 - Econ302 Homework Assignment 5 Due...

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Econ302 Homework Assignment 5 Due Wednesday April 16 Questions 2, 3, 5 will be graded Name: 2.  Suppose the market for widgets can be described by the following equations: Demand: P = 10 - Q Supply: P = Q - 4 where P is the price in dollars per unit and Q is the quantity in thousands of units. a. What is the equilibrium price and quantity? b. Suppose the government imposes a tax of $1 per unit to reduce widget  consumption and raise government revenues.  What will the new equilibrium  quantity be?  What price will the buyer pay?  What amount per unit will the  seller receive?
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c. Suppose the government has a change of heart about the importance of  widgets to the happiness of the American public.  The tax is removed and a  subsidy   of   $1   per   unit   is   granted   to   widget   producers.     What   will   the  equilibrium quantity be?  What price will the buyer pay?  What amount per 
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This note was uploaded on 04/29/2008 for the course ECON 302 taught by Professor Toossi during the Spring '08 term at University of Illinois at Urbana–Champaign.

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Econ302-hw5-spring08 - Econ302 Homework Assignment 5 Due...

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