Econ100B PS4 Solutions

# Econ100B PS4 Solutions - ECO 100B Problem Set 4 1(a At the...

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ECO 100B Problem Set 4 1. (a) At the equilibrium, 1000 10 P = 10 + 200 P P = 990 210 = 33 7 Q = 6670 7 (b) With the \$1 tax, marginal costs increase by \$1 and hence, so does the supply curve. Let Q S = 10 + 200 P P = Q S 10 200 With the \$1 tax, from the consumer±s perspective, the supply curve shifts up by \$1. So: P = Q S 10 200 + 1 = Q S + 190 200 Q S = 200 P 190 At the equilibrium, Q D = Q S so: 200 P 190 = 1000 10 P P = 17 3 Q = 2830 3 (c) The consumer±s price goes up from 33 7 to 17 3 which is an increase of \$ 20 21 . The price received by producers goes down from 33 7 to 17 3 1 ± which is a decrease of 1 21 . The consumer±s share is 20 21 and the producer±s share is 1 21 . (d) The Long Run Supply curve is horizontal at P = 33 7 . (e) The \$1 per unit tax will shift the entire AC curve up by \$1, as well as its minimum point 1

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(where MC = AC). So the new Long-run supply curve will be
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Econ100B PS4 Solutions - ECO 100B Problem Set 4 1(a At the...

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