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Question 1. Welfare Part a) Consider a perfectly completive market for Mandrake, a plant with many magical uses, in which there exists 40 small firms in the short run. Suppose each small firm has the same cost function c(q) = F + 2q2, where F represents the fixed cost. In addition, there is a market demand of D(p) = 600 - 10p for Mandrake. Part b) Determine the firm and market supply curves in short run. Part c) Draw on a graph the market demand and the short run supply. Label the equilibrium, the consumer surplus, and the producer surplus. Part d) Calculate the consumer and producer surplus in equilibrium. Part e) Suppose now the government imposes a tax of $5 on each Mandrake, collected from the buyer. Determine the new equilibrium price and quantity after the tax. Part f) Determine the change in consumer surplus, producer surplus, tax revenue and the dead- weight loss associated with the introduction of the tax. Question 2. General Equilibrium