In a perfectly competitive market for cases of plastic water bottles, market demand is given by...

In a perfectly competitive market for cases of plastic water bottles, market demand is given by PD = 30−QD and market supply is given by PS = 10+ 14QS (where QD and QS are the quantities of cases bought and sold, respectively).

(a) (2 points) What is the quantity of cases bought and sold in competitive equilibrium?

(b) (2 points) What is the price in competitive equilibrium?

(c) (2 points) Suppose that the government imposes a tax of $10 per case of plastic water bottles. How many cases are bought and sold after the tax?

(d) (2 points) What is the deadweight loss associated with the tax in part (c)?

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Expert Solution

Rahul Sunny answered 1 month ago

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