6. The long-run supply curve for a particular type of kitchen knife is a horizontal line at a price of $3 per knife. The demand curve for such a kitchen knife is 2, = 50 – 2P where Q, is the quantity of knives demanded (in millions per year) and P is the price per knife (in dollars). a. What is the equilibrium output of such knives? b. If a tax of $1 is imposed on each knife, what is the equilibrium output of such knives? (Assume the tax is collected by the government from the suppliers of knives.) c. After the tax is imposed, you buy such a knife for $3.75. Is this the long- run equilibrium price?
6. The long-run supply curve for a particular type of kitchen knife is a horizontal line at a price of $3 per knife. The demand curve for such a kitchen knife is 2, = 50 – 2P where Q, is the quantity of knives demanded (in millions per year) and P is the price per knife (in dollars). a. What is the equilibrium output of such knives? b. If a tax of $1 is imposed on each knife, what is the equilibrium output of such knives? (Assume the tax is collected by the government from the suppliers of knives.) c. After the tax is imposed, you buy such a knife for $3.75. Is this the long- run equilibrium price?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
![**Economics Problem: Supply and Demand for Kitchen Knives**
In this exercise, we examine the supply and demand for a specific type of kitchen knife. The long-run supply curve is represented as a horizontal line at a price of $3 per knife. The demand curve is given by the equation:
\[ Q_D = 50 - 2P \]
where \( Q_D \) is the quantity of knives demanded (in millions per year), and \( P \) is the price per knife (in dollars).
**Questions:**
a. **What is the equilibrium output of such knives?**
b. **If a tax of $1 is imposed on each knife, what is the equilibrium output of such knives?** (Assume the tax is collected by the government from the suppliers of knives.)
c. **After the tax is imposed, you buy such a knife for $3.75. Is this the long-run equilibrium price?**
**Analysis:**
- **Equilibrium Output Calculation:**
- Set the supply price equal to the demand price to find the equilibrium point.
- **Effect of Tax on Equilibrium:**
- Add the tax to the supply price and determine the new equilibrium.
- **Price Verification Post-Tax:**
- Analyze if the new purchase price aligns with the long-run equilibrium price after the tax has been imposed.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F04c06aee-69db-4b48-aaad-c9b35ad590a4%2Fdc5fef53-259f-420c-aed3-b1da1bbeebfd%2F56t2nl_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Economics Problem: Supply and Demand for Kitchen Knives**
In this exercise, we examine the supply and demand for a specific type of kitchen knife. The long-run supply curve is represented as a horizontal line at a price of $3 per knife. The demand curve is given by the equation:
\[ Q_D = 50 - 2P \]
where \( Q_D \) is the quantity of knives demanded (in millions per year), and \( P \) is the price per knife (in dollars).
**Questions:**
a. **What is the equilibrium output of such knives?**
b. **If a tax of $1 is imposed on each knife, what is the equilibrium output of such knives?** (Assume the tax is collected by the government from the suppliers of knives.)
c. **After the tax is imposed, you buy such a knife for $3.75. Is this the long-run equilibrium price?**
**Analysis:**
- **Equilibrium Output Calculation:**
- Set the supply price equal to the demand price to find the equilibrium point.
- **Effect of Tax on Equilibrium:**
- Add the tax to the supply price and determine the new equilibrium.
- **Price Verification Post-Tax:**
- Analyze if the new purchase price aligns with the long-run equilibrium price after the tax has been imposed.
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