Question 1: Very Basic Supply & Demand This question revisits the lumber market theme from the Discussion Questipns 2. Suppose a friend of yours tells you that in his home country (which we can call Country 1), the market for lumber is well described by the following supply and demand equations (slightly modified from the earlier question): D: QD = 12 - P S: Qs P-2 Note that these equations can be rearranged as follows (sometimes called the "inverse demand" and "inverse supply" equations): D: PD = 12 - Q S: Ps=2+Q A) Find the equilibrium price and quantity of lumber. B) If the government imposed a tax of $2 per unit, how large would the DWL be? C) If the government imposed a tax of $4 per unit, how large would the DWL be?
Question 1: Very Basic Supply & Demand This question revisits the lumber market theme from the Discussion Questipns 2. Suppose a friend of yours tells you that in his home country (which we can call Country 1), the market for lumber is well described by the following supply and demand equations (slightly modified from the earlier question): D: QD = 12 - P S: Qs P-2 Note that these equations can be rearranged as follows (sometimes called the "inverse demand" and "inverse supply" equations): D: PD = 12 - Q S: Ps=2+Q A) Find the equilibrium price and quantity of lumber. B) If the government imposed a tax of $2 per unit, how large would the DWL be? C) If the government imposed a tax of $4 per unit, how large would the DWL be?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Question 1: Very Basic Supply & Demand
This question revisits the lumber market theme from the Discussion Questipns 2. Suppose a
friend of yours tells you that in his home country (which we can call Country 1), the market for
lumber is well described by the following supply and demand equations (slightly modified from
the earlier question):
D:
QD = 12-P
S: Qs =P-2
Note that these equations can be rearranged as follows (sometimes called the "inverse demand"
and "inverse supply" equations):
D:
PD = 12-Q
S:
Ps= 2+Q
A) Find the equilibrium price and quantity of lumber.
B) If the government imposed a tax of $2 per unit, how large would the DWL be?
C) If the government imposed a tax of $4 per unit, how large would the DWL be?
D) If the government implemented a subsidy of $2 per unit, how large would the DWL be?
Transcribed Image Text:Question 5: External Costs and External Benefits
Suppose we modified Question 1 by including both of the following: MEC-2 and MEB-2.
Would that cause the answers to differ from those in Question 1? You can answer this in one.
word, but you should know why your one-word answer is correct.
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