hw5 - Homework Assignment # 5 Econ 121b. Intermediate...

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Homework Assignment # 5 Econ 121b. Intermediate Microeconomics due February 23, 2011 Please put your discussion-section time on your answer. 1. This exercise concerns the welfare effects of a tax in a partial equilibrium model. (a) Let p d D C ± D q and p s D A C B q be the market inverse demand and in- verse supply functions, respectively, where A;B;C and D are constants such that C > A ² 0 , B > 0 and D > 0 . Calculate the equilibrium price and quantity and the consumer and producer surpluses as functions of the demand and supply parameters. (b) For the demand-supply system above consider the effect of an ad valorem tax t levied on producers. Calculate the equilibrium price and quantity, the tax revenue, the consumer and producer surpluses and the deadweight loss as functions of the demand and supply parameters and t . (c) Now let p d D 1= p q and p s D A be the market demand and supply functions, re- spectively, where A > 0 is a constant. Calculate the equilibrium price and quantity,
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hw5 - Homework Assignment # 5 Econ 121b. Intermediate...

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