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Please answer question B

#### Homework Answers

Answer #1

A tax of 3 will reduce the demand and so new demand equation is Q = 72 - 4(P + 3) or Q = 60 - 4P. Supply equation is Q = -6 + 2P. New equilibrium price and quantity are

60 - 4P = -6 + 2P

66 = 6P

P(sellers) = 66/6 = \$11

P(buyers) = 11 + 3 = \$14

Quantity = -6 + 2*11 = 16 units

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