Note: make sure draw the graphs and label everything clearly! You will need to upload your answers. The market for apples is perfectly competitive, with the market supply curve is given by P = 1/8Q and the market demand curve is given by P = 40 - 1/2Q. [4'] A) Calculate the resulting consumer surplus and producer surplus. And indicate the consumer surplus and producer surplus on the demand and supply diagram. [6'] B) Suppose the government impose a 10 dollars of sale tax on consumer. What will the new market price and quantity be? How much deadweight loss will be created by this policy? Explain.
Note: make sure draw the graphs and label everything clearly! You will need to upload your answers. The market for apples is perfectly competitive, with the market supply curve is given by P = 1/8Q and the market demand curve is given by P = 40 - 1/2Q. [4'] A) Calculate the resulting consumer surplus and producer surplus. And indicate the consumer surplus and producer surplus on the demand and supply diagram. [6'] B) Suppose the government impose a 10 dollars of sale tax on consumer. What will the new market price and quantity be? How much deadweight loss will be created by this policy? Explain.
Chapter24: Perfect Competition
Section: Chapter Questions
Problem 10E
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