Answer to Question #105223 in Microeconomics for Prosper

Question

The demand curve for salted codfish is D(P) = 200 − 5P and the supply curve S(P)=5P.
a) Draw the demand and supply curves for salted codfish and compute the equilibrium price
and quantity.
b) A quantity tax of $2 per unit sold is placed on salted codfish. Draw the new supply curve,
where the price on the vertical axis remains the price per unit paid by demanders. What

would be the new equilibrium price paid by the demanders, the new price received by the
suppliers and the quantity sold?
c) What is the loss in the consumer surplus, in the producer surplus and the deadweight loss
of the tax?

Answer 1

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