Consider the competitive market for a good. Consumers have quasilinear preferences that yield the market demand curve q = 15 – . The market supply curve is q = 2p. %3D (a) What are the original equilibrium price and quantity? What are pro- ducer surplus, consumer surplus and total surplus? In order to help the consumers, the government decides to tax the firms $10 unit sold and give the revenues back to consumers as a transfer. per (b) What are the new equilibrium price and quantity? What are producer surplus, consumer surplus and total surplus? (c) How successful was the government's program? Explain the economic intuition for your answer.

Consider the competitive market for a good. Consumers have quasilinear preferences that yield the market demand curve q = 15 – . The market supply curve is q = 2p. %3D (a) What are the original equilibrium price and quantity? What are pro- ducer surplus, consumer surplus and total surplus? In order to help the consumers, the government decides to tax the firms $10 unit sold and give the revenues back to consumers as a transfer. per (b) What are the new equilibrium price and quantity? What are producer surplus, consumer surplus and total surplus? (c) How successful was the government's program? Explain the economic intuition for your answer.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.10P

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