Question

In: Economics

Microeconomics: 1. (19 marks) Suppose the demand and supply functions of cigarettes in a competitive market...

Microeconomics:

1. Suppose the demand and supply functions of cigarettes in a competitive market are as follows:

Demand: Q = 100 – 4P

Supply: Q = –20 + 2P

a. Find the equilibrium price and quantity of cigarettes.

b. Suppose the government imposes a $6 per-unit tax on consumers of cigarettes. Find the per-unit price of cigarettes paid by consumers and the per-unit price of cigarettes received by sellers after the imposition of the tax. Show your workings.

c. Draw a well-labeled diagram showing the effect of the tax on the price of cigarettes paid by buyers, the price of cigarettes received by sellers, the government tax revenue and the equilibrium quantity of cigarettes.

d. Calculate the per-unit tax burden on consumers and sellers. Show your workings.

e. Calculate the after-tax consumer surplus, producer surplus, and deadweight loss. Show your workings.

Solutions

Expert Solution


Related Solutions

Suppose that the market for cigarettes is a competitive market and is described by the following supply and demand functions:
Suppose that the market for cigarettes is a competitive market and is described by the following supply and demand functions:Demand: QD = 100000 – 500PSupply: QS= – 20000 + 2000PWhere Q is the number of packets and P is the price per packet of cigarettes.(a) Calculate the equilibrium price and quantity and draw a diagram to illustrate your answer.(b) Show on your diagram and calculate the size of the:(i) Consumer surplus(ii) Producer surplus(iii) Total surplus(iv) Deadweight loss(c) Suppose the government...
Assume the market for cigarettes is perfectly competitive. The demand and supply for cigarettes in Oakland...
Assume the market for cigarettes is perfectly competitive. The demand and supply for cigarettes in Oakland is given by the following equations: Where P represents the price of a carton of cigarettes and Q denotes the quantity of cartons of cigarettes. Use the above information to answer the following questions. Show your work for full credit. a. Draw a graph of the market in equilibrium and solve for the equilibrium quantity and price. Identify on your graph and calculate the...
Suppose the market demand for cigarettes is: QD = 10 − P, and the supply of...
Suppose the market demand for cigarettes is: QD = 10 − P, and the supply of cigarettes is: QS = −2 + P, where P is the price per pack of cigarettes a. Graph the supply and demand curves. b. What is the equilibrium price and quantity sold of cigarettes? Show this on the graph. If the government imposes a cigarette tax of $1 per pack, c. What is the price paid by consumers? d. What is the price faced...
3- In a perfectly competitive market the demand and supply functions for a product is given...
3- In a perfectly competitive market the demand and supply functions for a product is given by ?? = 200 − 4? ?? = −100 + 6? Now suppose that the government taxes the good by a unit tax of 5TL. a) Find the price that demanders pay and the price that suppliers receive when buyers are responsible to pay for the tax. Find the total tax collection and the deadweight loss from this taxation policy. Show your analysis explicitly...
Suppose that demand and supply for a competitive market are as follows: Qd = 320 -...
Suppose that demand and supply for a competitive market are as follows: Qd = 320 - P and Qs = -40 + 2P What would be the price and output combination that would result if firms in this market merged together to become a profit maximizing monopolist? By how much would the price change from the competitive level?
u13. The market for good X is perfectly competitive. The demand and supply functions of good...
u13. The market for good X is perfectly competitive. The demand and supply functions of good X are given as follows: uQd = 6000 – 30 P  Qs = –500 + 20 P uQd is quantity demanded in thousand units, Qs is quantity supplied in thousand units, and P is the unit price in dollars for good X. All 1000 firms in this market are identical and their cost structures do not depend on the number of firms in this market....
Suppose the demand and supply curves of a perfectly competitive market are: Supply: Q = P...
Suppose the demand and supply curves of a perfectly competitive market are: Supply: Q = P - 10 Demand: Q = 90 - P (1) Solve for the market equilibrium (price and quantity at equilibrium) (2) Solve for Welfare (Total Surplus). (3) Suppose a per-unit tax of $10 is imposed in the market. Calculate tax revenue and deadweight loss.
Microeconomics # 1 Illustrate the effects of changes in determinants of demand and supply upon market...
Microeconomics # 1 Illustrate the effects of changes in determinants of demand and supply upon market equilibrium.
1) Suppose a perfectly Competitive market had Demand given as: P = 225 -.03Q and Supply...
1) Suppose a perfectly Competitive market had Demand given as: P = 225 -.03Q and Supply Given as: P = 15 + 0.04Q. What are the equilibrium values for P and Q? Now suppose demand is still P = 225 -.03Q but the industry has one firm with a marginal cost given by: MC = 15 + .04Q. What are the equilibrium values for P and Q in this case? How do the values pf P and Q in Pure...
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)
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT