Question

In: Economics

The demand curve for a good is given by the linear function Qd = 60 -...

The demand curve for a good is given by the linear function Qd = 60 - P, where P is the price buyers pay for the good and Qd is the quantity of the good demanded. The supply curve for the good is given by the linear function Qs = 2P, where P is the price sellers receive for the good and Qs is the quantity of the good supplied. If a tax of $12 per unit is levied on buyers of the good, what will happen to the market price of the good in competitive equilibrium?

a. The market price will rise by $8.

b. The market price will rise by $4.

c. The market price will fall by $12.

d. The market price will fall by $8.

e. The market price will fall by $4.

Solutions

Expert Solution

Qd = 60 - P

Qs = 2P

Equilibrium

60 -P = 2P

60 = 3P

P = 60/3

= 20

After tax:

60 -P = 2(P -12)

60 - P = 2P -24

84 = 3P

P = 84/3

= 28

Increase in price is equal to $ 8

Right Answer: (A)

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Given the demand curve for a monopolist: Qd= 60 -2 P and the marginal revenue curve:...
Given the demand curve for a monopolist: Qd= 60 -2 P and the marginal revenue curve: MR = 30 -Q. Marginal cost equals average cost at $14. What is the price and quantity that the profit-maximizing monopolist will produce? Graph these curves andlabel theequilibrium points. b) Ifthis were a competitive industry, what price and quantity would be produced? Show this on the above graphand show your work (answers) below. c) What is the monopolist's profit? What is the consumer surplus...
Suppose that the general demand function for good X is Qd = 60 – 2Px 0.01M...
Suppose that the general demand function for good X is Qd = 60 – 2Px 0.01M 7PR where Qd is quantity of X demanded, Px is price of X, M is average consumer income, and PR is price of a related good R. a)Is good X normal or inferior? Explain. b)Are good X and R substitutes or complements? Explain. c)Suppose that M = $40,000 and RR = $20. What is the demand function of good X. d)Suppose the supply function...
The demand for good x is given as Qd: Qd = 1000 – 5Px – 0.5I...
The demand for good x is given as Qd: Qd = 1000 – 5Px – 0.5I – 10Py + 2Pz – 3Pc Where, Qd = quantity demanded of good x (in thousand units)             Px = price of good x             I = consumer incomes (in thousand)             Py = price of good y             Pz = price of good z             Pc = price of good c If consumer incomes are 30 (in thousand), price of good y is...
The demand for good x is given as Qd: Qd = 1000 – 5Px – 0.5I...
The demand for good x is given as Qd: Qd = 1000 – 5Px – 0.5I – 10Py + 2Pz – 3Pc Where, Qd = quantity demanded of good x (in thousand units)     Px = price of good x     I = consumer incomes (in thousand)     Py = price of good y     Pz = price of good z     Pc = price of good c If consumer incomes are 30 (in thousand), price of good y is...
Given a demand curve Qd = 5000 - 300P and supply curve Qs = -300 +...
Given a demand curve Qd = 5000 - 300P and supply curve Qs = -300 + 600P, what are the equilibrium price and quantity levels that could be expected for this product? How would the demand function be affected by each of the following actions? 1) A decrease in the number of suppliers of the product? 2) A reduction in personal income of buyers in the market? 3) Strong evidence of higher demand among millennials because of a recent advertising...
The demand function for roses is given as: Qd = a + bp + fpc and...
The demand function for roses is given as: Qd = a + bp + fpc and the supply function is given as: Qs = c + ep, where: (1) a, b, c, e, and f are constants (with a > 0, b < 0, c > 0, e > 0, and f > 0) and (2) Qd and Qs are quantity demanded and supplied, respectively, with p the price of roses, and pc is the price of chocolates. Based on...
Suppose the demand curve for beer is given by QD = 50 − 10P and the...
Suppose the demand curve for beer is given by QD = 50 − 10P and the supply curve for beer is given by QS= −10 +20P. Now, the government imposes a price ceiling of $1 in the market for beer. As a result, the producer surplus decreases. Now, a part of the initial producer surplus is part of the deadweight loss and a part of it is transferred to consumers. a) What is the amount of producer surplus that is...
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.
Supply and Demand for an imported good are given by QD = 30 – 4P and...
Supply and Demand for an imported good are given by QD = 30 – 4P and QS = 6 + 2P. Currently Canada allows free trade at a world price of $2. a. Trade disputes lead the Canadian government to implement an import quota at Q = 6 units for this good. Provide a labelled diagram and calculate how introducing an import quota will affect consumer, producer and licensee surplus in the economy. Label the deadweight (efficiency) loss. b. Clearly...
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?
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT