The demand curve for a particular market is given by: D (p) = 880 - 20p There are 100 firms operating in this market each with a cost function c (q) = q 2 /4 (i) What is the equilibrium price and quantity? Suddenly this good increases in popularity everyone is now willing to pay $1 more for the good. The government decides now is a good time to introduce a value tax of 25% on the good. (ii) What is the new equilibrium price and quantity as a result of the popularity increase and the tax? (Assume we’re in the short run so that the number of firms does not change)

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To find the equilibrium price and quantity we set the demand function equal to the cost function and ... View the full answer