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In: Economics

2Q Consider a closed economy. Let the demand curve be P = 80 - Q and...

2Q

Consider a closed economy. Let the demand curve be P = 80 - Q and the supply

curve be P = 20 + 2Q .

a) Calculate the equilibrium price and equilibrium quantity.

b) Suppose the government sets a price ceiling of $55, what is the amount of excess demand or excess supply? (Write down excess demand or excess supply).

c) Suppose the government sets a production quota of 16 units, calculate the equilibrium price and equilibrium quantity.

2. Consider a closed economy. Let the demand curve be P = 80 - Q and the supply

curve be P = 20 + 2Q .

a) Suppose the government imposes an unit tax of $3/unit, calculate Q’, Pc, Ps and the tax

revenue

i) assuming the tax is imposed on the consumers

ii) assuming the tax is imposed on the producers.

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