2. Suppose demand and supply are given by Qd, =7-P, and Qs, =P- a. Determine the equilibrium price and quantity and interpret your answer clearly. b. Suppose a $6 excise tax is imposed on the good. Determine the new equilibrium price and quantity. c. Show the existing and new equilibrium graphically, given that there is an excise tax imposed on the good. Also, interpret your graph briefly (1 to 2 sentences only). d. Given the $6 excise tax, how much is the consumer and producer surpluses? Interpret your result (1 sentence only). e. Given the $6 excise tax, how much is the deadweight loss? Interpret your result (1 sentence only).

2. Suppose demand and supply are given by Qd, =7-P, and Qs, =P- a. Determine the equilibrium price and quantity and interpret your answer clearly. b. Suppose a $6 excise tax is imposed on the good. Determine the new equilibrium price and quantity. c. Show the existing and new equilibrium graphically, given that there is an excise tax imposed on the good. Also, interpret your graph briefly (1 to 2 sentences only). d. Given the $6 excise tax, how much is the consumer and producer surpluses? Interpret your result (1 sentence only). e. Given the $6 excise tax, how much is the deadweight loss? Interpret your result (1 sentence only).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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