The market demand function for corn is Qd = 15 2P and market supply function is
ID: 1193985 • Letter: T
Question
The market demand function for corn is Qd = 15 2P and market supply function is Qs = 5P 2.5, both measured in billions of bushels per year. Suppose the government imposes a $1.40 tax on each bushel of corn.
(a) What are the after-tax equilibrium price and quantity?
(b) What will be the after-tax consumer surplus?
(c) What will be the after-tax producer surplus?
(d) What will be the aggregate surplus?
(e) What will be the deadweight loss caused by the tax?
(f) Graph and label the supply and demand curves, the consumer surplus, the pro- ducer surplus, and the deadweight loss in the same graph.
Explanation / Answer
Suppose there are 50 brownie manufacturers. What is the supply function for brownies
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