Question

e upply and Demand Equotions. Suppose demand is given by the equation P 120-0 and supply is given by e equation P 40+ The price is in dollars in the quantity is in thousands. 13 What is producer surplus in equilibrium? a) $300,000 b) $500,000 c $1,000,000 d) None of the above. What is the deadweight loss associated with a tax of $20 per unit? 14. a) $10,000 b) $50,000 c) $150,000 d) $300,000 15. Suppose the scenario represents the domestic market, and the world price is $75. If the government opens this market to international trade what will be the result? a) The country will import 15,000 units of the good. b) The country will export 15,000 units of the good c) The country will import 16,000 units of the good. d) The country will export 16,000 units of the good. Using the information from the previous question, what would be the result of a $5/unit tariff on this good? 16. Dead weight loss of $53,000 and government revenue of $13,250. Government revenue of $57,600, and dead weight loss of $19,200. b) Dead weight loss of $19,200, and government revenue of $57,600. c) Government revenue of $53,000, and dead weight loss of $13,250. a) d

Answer 1

Demand P= 120-3/2Qd or 120 - 1.5Qd

Supply P= 40+5/2Qs or 40+ 2.5Qs

Equilibrium Price is at Demand = Supply.

So, 120-1.5Q= 40+2.5Q

80= 4Q or Q= 20

P= 120-1.5*20 or 120-30

P=90

So equilbruim price is 90 and qauntity is 20

Producer surplus= 1/2*(90-40)*(20)

Ps= 500

1) so the answer is B-) $50,000

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