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Qs = 5P² + 200 in bottles and prices are r

Qs = 5P² + 200 in bottles and prices are r

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question 1 The market demand and supply functions for whisky are: QD = 220015P² Qs = 5P² + 200, where quantities are measured in bottles and prices are measured in dollars per bottle. (a) Calculate the equilibrium quantity and price. (b) Suppose that a new tax on whisky of $5 per bottle is introduced. What is the new equilibrium quantity? What is the price paid by consumers? What is the price received by sellers? (c) Calculate the revenues collected by the government with this tax. (d) Represent graphically the deadweight loss generated by this tax. Indicate the coordinates of the points that define this area. (e) In the same graph, indicate (i) the producers' surplus and the consumers' surplus before and after the tax, and (ii) the revenues of the government, showing the corresponding transfers of surplus from producers and transfers of surplus from consumers.
Transcribed Image Text:Question 1 The market demand and supply functions for whisky are: QD = 220015P² Qs = 5P² + 200, where quantities are measured in bottles and prices are measured in dollars per bottle. (a) Calculate the equilibrium quantity and price. (b) Suppose that a new tax on whisky of $5 per bottle is introduced. What is the new equilibrium quantity? What is the price paid by consumers? What is the price received by sellers? (c) Calculate the revenues collected by the government with this tax. (d) Represent graphically the deadweight loss generated by this tax. Indicate the coordinates of the points that define this area. (e) In the same graph, indicate (i) the producers' surplus and the consumers' surplus before and after the tax, and (ii) the revenues of the government, showing the corresponding transfers of surplus from producers and transfers of surplus from consumers.
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