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Unformatted text preview: The reduction in economic surplus resulting from a market not being in competitive equilibrium. Tax Incidence The actual division of the burden of a tax between buyers and sellers in a market. 2. Using the following Demand and Supply functions: Qs = 10 + 1/2P; Qd = 100 2P Calculate the equilibrium price (P) and quantity (Q) in a competitive market. 3. Draw a demand and supply graph based on the foregoing problem. Indicate the areas of consumer surplus and producer surplus at the market equilibrium. 4. If the government sets a price floor (P2) at $40, will there be shortage or a surplus? Is there a deadweight loss? A:...
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