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Homework 5

# Homework 5 - ECON 1100 Intermediate Microeconomics...

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ECON 1100: Intermediate Microeconomics Instructor: Sandra Orozco Homework 5 Due date: November 3, 2010 1. (10 points) In this market the demand and supply curves are given by Qd = 10 - 0.5Pd Qs = - 2 + Ps when Ps = 2, and 0, when Ps < 2 where Qd is the quantity demanded when the price consumers pay is Pd, and Qs is the quantity supplied when the price producers receive is Ps. (a) With no tax, what are the equilibrium price and quantity? (b) Suppose the government imposes an excise tax of \$ 3 per unit. What will the new equilibrium quantity be? What price will buyers pay? What price will sellers receive? 2. (10 points) In a competitive market, there is currently no tax, and the equilibrium price is \$ 60. The market has a down-ward- sloping demand curve. The government is about to impose an excise tax of \$ 4 per unit. In the new equilibrium with the tax, what price will producers receive and consumers pay if the supply curve is a) Perfectly elastic b) Perfectly inelastic Illustrate your answers graphically.

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Homework 5 - ECON 1100 Intermediate Microeconomics...

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