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Homework-7 - Econ 501 Homework Assignment 7 Due Tuesday...

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Econ 501 Homework Assignment 7 Due Tuesday March 4th 1. BB 9.18 A competitive industry consists of 6 type A firms and 4 type B firms. Each firm of type A operates with the supply curve: 10 S A Q P = − + if P>10, and 0 otherwise. Each firm of type B operates with the supply curve: 2 S B Q P = for P>=0. a) Suppose the market demand is 108 10 D M Q P = . At the market equilibrium, which firms producing, and what is the equilibrium price? b) Suppose the market demand is 228 10 D M Q P = . At the market equilibrium, which firms producing, and what is the equilibrium price? 2. BB 10.9 Suppose that the market for cigarettes in a particular town has the following supply and demand curves: ; 50 S D Q P Q P = = , where the quantities are measured in thousands of units. Suppose the town council needs to raise $300,000 in revenue and decides to do this by taxing the cigarette market. What should the excise tax be in order to raise the required amount of money?
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