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The Demand and Supply in a Market Are Represented by the Equations

Question 22

Essay

The demand and supply in a market are represented by the equations P = 50 - .2QD and P = 20 + .3QS.A spillover cost in production equal to $2 per unit exists in this market.(a) What are the equilibrium price and quantity?
(b) What are the optimal price and quantity?
(c) How large must a specific tax in this market be to eliminate the market failure? Is the tax equal to the difference between the equilibrium price and the optimal price?

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