Assume we operate in a competitive market with the following supply and demand functions: QD =4,000–40p...

Assume we operate in a competitive market with the following supply and demand functions:

QD =4,000–40p QS =60p–1,000
a) If suppliers want to earn the maximum possible income, at what price should they

sell their products? (5 points)

b) The Government has decided to apply an indirect tax of €10/unit. Calculate the new equilibrium, the amount the Government collects from taxes and the deadweight loss resulting from this new situation. Draw the corresponding graph. (8 points)

Expert Solution

Rahul Sunny answered 2 years ago

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