1. The inverse demand curve for the product of a perfectly competi- tive industry is given by P = 160-0.5Q, where P is the price per unit and Q is the quantity. The short-run industry inverse supply curve (for a given number of firms) is P = 100+ 0.25Q. (a) Calculate the equilibrium price and quantity, and hence cal- culate the consumers' surplus and producers' surplus. A tax of 15 per unit sold is now imposed on every unit sold. Calculate the new short-run equilibrium price (including tax) and quantity, and hence calculate the revenue raised. What is the deadweight loss (excess burden) of the tax?

1. The inverse demand curve for the product of a perfectly competi- tive industry is given by P = 160-0.5Q, where P is the price per unit and Q is the quantity. The short-run industry inverse supply curve (for a given number of firms) is P = 100+ 0.25Q. (a) Calculate the equilibrium price and quantity, and hence cal- culate the consumers' surplus and producers' surplus. A tax of 15 per unit sold is now imposed on every unit sold. Calculate the new short-run equilibrium price (including tax) and quantity, and hence calculate the revenue raised. What is the deadweight loss (excess burden) of the tax?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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