Question

1. Consider a closed economy. Let the demand curve be P = 80 - Q and the supply curve be P = 20 + 2Q

a) Calculate the equilibrium price and equilibrium quantity.

b) Suppose the government sets a price ceiling of $55, what is the amount of excess demand or excess supply? (Write down excess demand or excess supply).

c) Suppose the government sets a production quota of 16 units, calculate the equilibrium price and equilibrium quantity.

2. Consider a closed economy. Let the demand curve be P = 80 - Q and the supply

curve be P = 20 + 2Q .

a) Suppose the government imposes an unit tax of $3/unit, calculate Q’, Pc, Ps and the tax

revenue

i) assuming the tax is imposed on the consumers

ii) assuming the tax is imposed on the producers.

3. (Consider a closed economy. Let the demand curve be P = 80 - Q and the supply curve be P = 20 + 2 Q .

Suppose the government imposes a sales tax of 10%, calculate Q’, Pc, and Ps

5. (6 points) Consider a closed economy. Let the demand curve be P  80Q and the supply

curve be P = 20 + 2Q .

Assume the economy is open to trade and Pw = $45

i) What is Pd ? What is the size of import?

ii) If an import tariff of $3/unit is imposed, what is Pd? What is the size of import? What

is the amount of tax revenue?

iii) Calculate the import-prohibitive tariff rate.

6. Solve for x and y

2x + 3y = 40

x + y = 19

7. let f(x) = 6x^3 + 3x^3 - 4x + 1, find f' (x)

Answer 1