The long- run supply curve for a particular type of kitchen knife is a horizontal line at
Question:
QD = 50 - 2P
where QD is the quantity of knives demanded (in millions per year) and P is the price per knife (in dollars).
a. What is the equilibrium output of such knives?
b. If a tax of $1 is imposed on each knife, what is the equilibrium output of such knives? (Assume the tax is collected by the government from the suppliers of knives.)
c. After the tax is imposed, you buy such a knife for $3.75. Is this the long-run equilibrium price?
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Related Book For
Managerial Economics Theory Applications and Cases
ISBN: 978-0393912777
8th edition
Authors: Bruce Allen, Keith Weigelt, Neil A. Doherty, Edwin Mansfield
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