Please refer to the background information below to answer the following three questions.There are two groups of consumers, A and B, for herbal medicine with the following demand relationsrespectively:Group A: P 430 -0.6QGroup B: P=570 -0.1QThe market supply of herbal medicine isP=215+0.6Qwhere P is price per unit of herbal medicine (in dollars), and Q is quantity of herbal medicine.8. Suppose the market is free of government intervention. We can compute that the market equilibriumprice is [Answer08A = 519.29] dollars per unit, and the market equilibrium quantity is [Answer08B507.14] units.9. Suppose the central planner forces the economy to produce and exchange herbal medicine with thequantity of 953 units. We will expect a minimum welfare loss of [Answer0969576.01] dollarswhen compared to the market without intervention.10. Suppose the central planner wants to achieve the same quantity (953 units) using taxation or subsidy.The central planner should impose a [Answer 10A = A] (A. subsidy, B. tax) of [Answer10B312.10dollars per unit.

The objective of the question is to understand the impact of government intervention on the market…

Answered: Please refer to the background…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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