ECON 101 METHOD AND HELP ONLY

Q5. (2 points) equihbrum, emmpetitiom, taxes and subsidies. Assume that there are many, many firms that sell mobile phones, and assume that the firms' products are perfect so that the supply Of mobile phones characterized perfect mtnpetition. Potantial are hornegenons in their Wilnntion for mobile phone* and each potential buyer at mest I mobile phone ("homogenous" means that the Oinsnmers are similar to one another). that there are buyMs and potential buycT's willingngss to pay for a mobile phone is 700. Assume that ewry firm's total curve is given by TC(q) where q is the amount produced the firm. a) (l point) Solve for the FAuilibrium price. (Plezuse solve feu the equilibrium 'Bing informal reasoning; please do not draw a payoff matrix). b) (I point) Now assume that the gowrnment, imposes a 2() dollar tax on every mobile phone sale. (Eve-y time a phone is sold, the, firm selling the phone mmr;t gnernment 2() dollars). What is the impact of this tax on consumer well-being?