Consider the national market for electric school buses with the demand given by Qd=600-2P and supply...

Consider the national market for electric school buses with the demand given by Qd=600-2P and supply given by Qs=3P-150. (Note: the price is in thousands of US$ and quantity is in thousands of buses).

(10pts) Calculate the Total Surplus at the equilibrium point and provide a succinct argument as to why the equilibrium represents an efficient allocation of resources in this market.

(10pts) Consider now that the price of electric school buses increases by $60 (thousands) above the equilibrium price due to a tax on e-waste containing products. Will there be any efficiency losses (i.e. decrease in Total Surplus)? Calculate the new Total Surplus and find the Deadweight Loss due to this tax.

(10pts) Compute the Leakage that occurs after the tax in c is implemented (hint: use the DWL only from the consumer side). What is the significance of this number? Why is it important from a tax policy perspective?

Expert Solution

Rahul Sunny answered 2 years ago

Market demand is given as QD = 50 – 2P. Market supply is given as QS...

Market demand is given as QD = 50 – 2P. Market supply is given as QS = 3P + 10. Each identical firm has MC = 2.5Q and ATC = 2Q. a. What quantity of output will a single firm produce? What is the price? b. Calculate each firm’s profit? What will happen to it in the long-run? Explain the process. c. Draw the individual demand, MR, supply and ATC curves. Show profit in the diagram

Suppose Market demand is given as Qd = 60 – 2P. Market supply is given as...

Suppose Market demand is given as Qd = 60 – 2P. Market supply is given as Qs = 2P Also assume ATC = 0.4Q. a. How many units of the product would the perfectly competitive market supply? What would the equilibrium price be? b. What are the profit maximizing price and quantity if this market is a monopoly? c. Calculate the dead-weight loss created if this market started off as perfectly competitive but then became a monopoly.

Consider s perfectly competitive market with Market demand function Qd= 1000-2P Market Supply function Qs= 2P...

Consider s perfectly competitive market with Market demand function Qd= 1000-2P Market Supply function Qs= 2P a. Suppose there is no sales tax. What is the equilibrium price and equilibrium quantity? What is the consumer surplus and producer surplus? b. Now suppose the government imposes a sales tax of $50 per unit on consumers. What is the new equilibrium price and equilibrium quantity? What is the new consumer surplus and producer surplus? What is the tax revenue? c. Show your...

Consider a market where demand is given by P = 60 - ⅓ Qd and supply...

Consider a market where demand is given by P = 60 - ⅓ Qd and supply is given by P = 20 + ⅓ Qs. Consumer Surplus is ________ amd Producer Surplus is?

Consider a market where demand is given by P = 50 - Qd and supply is...

Consider a market where demand is given by P = 50 - Qd and supply is given by P = 10 + Qs. After a tax of t = 4 is placed on producers Producer surplus is between 180 and 200 Producer surplus is between 220 and 240 Producer surplus is between 160 and 180 Producer surplus is between 200 and 220

Consider the market for wheat where demand is given by: Qd=120-4p and supply is given by:...

Consider the market for wheat where demand is given by: Qd=120-4p and supply is given by: Qs=50 + 2p. Now suppose that, due to a market failure (an artificial shipping constraint), a maximum of 63.32 units of wheat can be supplied by firms in the market. The amount of the deadweight loss caused by the market failure is $__________________.

Consider the cigarette market. The market demand for cigarettes is given by P=50-QD. The market supply...

Consider the cigarette market. The market demand for cigarettes is given by P=50-QD. The market supply of cigarettes is given by P=10+4QS. Suppose that the government designs a tax program to reduce the number of smokers; it imposes an excise tax of $5 per pack on cigarette producers. What is the tax incidence on producers? $7 $8 $28 $32 $35

Suppose the market for corn is given by the following equations for supply and demand: QS = 2p − 2 QD = 13 − p

Suppose the market for corn is given by the following equations for supply and demand: QS = 2p − 2 QD = 13 − p where Q is the quantity in millions of bushels per year and p is the price. Calculate the equilibrium price and quantity. Sketch the supply and demand curves on a graph indicating the equilibrium quantity and price. Calculate the price-elasticity of demand and supply at the equilibrium price/quantity. The government judges the...

The demand and supply equations for a product are given by QD = 20-P QS = -10 +2P

The demand and supply equations for a product are given by QD = 20-P QS = -10 +2P 1. Calculate the equilibrium price and quantity. 2. Calculate the price elasticity of demand and the price elasticity of supply at the above equilibrium point. 3. An excise tax of $1 per unit is imposed on the producers of the product. Calculate the new equilibrium price and quantity. Calculate the consumer and producer tax burden ( as a percentage of...

The demand and supply for a product is given by: Qd: 120-4P and Qs: 2P+60 Suppose...

The demand and supply for a product is given by: Qd: 120-4P and Qs: 2P+60 Suppose the government imposes a price ceiling of P=$8 calculate: 1) consumer surplus after the price ceiling 2) Producer surplus after the price ceiling 3) Deadweight Loss

Question