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Chapters%208%20and%2010%20Practice%20B

Chapters%208%20and%2010%20Practice%20B - Chapters 8 and 10...

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Chapters 8 and 10 Practice B 1. Demand in a perfectly competitive market is P=100-Q. Supply in that market is P=10+Q. What is the market equilibrium price and quantity? Given that price and quantity, what is the consumer surplus, producer surplus, and deadweight loss? If the government imposes a $10 per unit sales tax, what is the new equilibrium price and quantity? Now how much is consumer surplus, producer surplus, and deadweight loss? 2. Suppose the following supply and demand curves govern the market for apples: supply: P = 3Q + 4 demand: P = 12 – Q a. Graph and calculate the equilibrium price and quantity. b. Show that the effect of a per-unit tax of $1 levied on suppliers is the same as when levied on buyers. c. What percent of the $1 per-unit tax is borne by sellers? What percent is borne by buyers? d. Define deadweight loss. How much is the welfare loss associated with this excise tax? 3. A competitive domestic pen industry has an inverse supply curve: P = 1 + 10 1 Q. Domestic inverse demand is: P = 12 - 12 1 Q. The world supply and demand curves are perfectly elastic at the world price of $3.
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