Consider the following supply and demand system: Qs = 5Ps and Qd = 500 – 5PD...

Consider the following supply and demand system: Qs = 5Ps and Qd = 500 – 5PD a) Determine the competitive equilibrium. b) Suppose a subsidy of $10 is imposed on this market. A subsidy is essentially a negative tax. Determine the price that sellers receive, the price that consumers pay, and the number of units that are transacted in this market. c) Who benefits the most from the subsidy?

Expert Solution

Rahul Sunny answered 2 years ago

If demand for toys is QD = 500 – 10P and supply is Qs = 100...

If demand for toys is QD = 500 – 10P and supply is Qs = 100 + 10P, answer the following questions using calculus: a. If the government imposes a restriction that price per toy cannot exceed $15, calculate the ΔCS, ΔPS, and DWL from the price ceiling. b. If the government imposes a restriction that price per toy cannot be lower than $18, calculate the ΔCS, ΔPS, and DWL from the price floor. c. If the government promises toy...

Consider the following supply and demand functions qD = 16 - 4p qS = -2 +...

Consider the following supply and demand functions qD = 16 - 4p qS = -2 + 5p Market Regulation Using the supply and demand functions from problem 1, suppose a price ceiling of p = 1 were implemented. a) How much is supplied to the market and how much is demanded? b) What is the excess demand? c) Calculate the consumer surplus, producer surplus, and welfare level without the price ceiling. d) Calculate the consumer surplus, producer surplus, welfare level,...

1. Suppose we have the following supply and demand curves. QD = 500 − 2PD QS...

1. Suppose we have the following supply and demand curves. QD = 500 − 2PD QS = 100 + 2PS a) Determine the competitive equilibrium for this market. b) Suppose that we impose a per unit tax of $50 on this market. Determine the following: 1. The price that sellers receive. 2. The price that consumers pay. 3. The number of units sold given the tax. c) What is the share of the burden borne by consumers? What is the...

. Consider the following supply and demand system Supply: QS = 60 PS – 120 Demand:...

. Consider the following supply and demand system Supply: QS = 60 PS – 120 Demand: QD = 1080 – 40 PD For part a) of this question, find the equilibrium price and quantity. Calculate the Consumer Surplus, Producer Surplus, and Total Surplus at the free market equilibrium. For parts b) through e), consider the government price control described below for each part below. For each part, calculate the equilibrium price and quantity. Calculate the consumer surplus, producer surplus, total...

Consider the following market demand and supply functions: Qd = 14 - p Qs = -6...

Consider the following market demand and supply functions: Qd = 14 - p Qs = -6 + p a) Calculate the perfectly competitive equilibrium price, quantity, consumer surplus, producer surplus, and total surplus. b) If an output tax t = 2 is imposed on consumers, calculate the new price, quantity, consumer surplus, producer surplus, and total surplus. What is the deadweight loss? Total taxes collected? (Note: an output tax shifts the demand curve intercept downward by the amount of the...

Consider the following demand and supply equations for sugar: Qd = 1,000 -1,000P Qs = 800...

Consider the following demand and supply equations for sugar: Qd = 1,000 -1,000P Qs = 800 + 1,000P where P is the price of sugar per pound and Q is thousands of pounds of sugar. a. What are the equilibrium price and quantity for sugar? At the same equilibrium price, compute the consumer surplus. b. Suppose that the government wishes to subsidize sugar production by placing a floor on sugar prices of $0.20 per pound. How much will the government...

Consider the following Market Demand and Supply Curves. Qd = 30-P Qs = P a.What is...

Consider the following Market Demand and Supply Curves. Qd = 30-P Qs = P a.What is the equilibrium quantity and price? b.What is the Consumer Surplus? c.What is the Producer Surplus? d.If the world price is 15, how much will be imported?

Consider the following Market Demand and Supply Curves. Qd = 30-P Qs = P a.If the...

Consider the following Market Demand and Supply Curves. Qd = 30-P Qs = P a.If the world price is 5, 1.how much will be imported? 2.What is the change in Consumer Surplus? 3.What is the change in Producer Surplus? b. If a tariff of $2 is imposed 1.how much will be imported? 2.What is the change in Consumer Surplus as a result of tariff? 3.What is the change in Producer Surplus as a result of tariff? 4.What is the government...

Consider a perfectly competitive market with demand and supply Qd = 3360 – 4P and Qs...

Consider a perfectly competitive market with demand and supply Qd = 3360 – 4P and Qs = -240+6P a . Find the equilibrium price and quantity in the market. b. Now suppose we impose a tax of $20 per unit on the supplier. What is the new supply curve, including the tax? c. What are the new equilibrium price and quantity in the market with the tax? d. How much of the tax incidence falls on the consumers in the...

Consider a perfectly competitive market with demand and supply Qd = 1550 – 3P and Qs...

Consider a perfectly competitive market with demand and supply Qd = 1550 – 3P and Qs = -50+5P The firm’s costs are described by the equations TC = 2500 – 5q +q2 and MC = -5 + 2q a. Find the equilibrium price and quantity in the market. b. Find the profit maximizing quantity for the firm. c. Find the firm’s profit. d. How many identical firms are in this market in the short run? Now consider the long-run where...

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