The Market Supply and Demand Functions for a Good Traded

Essay

The market supply and demand functions for a good traded on a perfectly competitive market are:
Qd = 40 - 2P and Qs = 15 + 3P
(i) What is the equilibrium price and quantity on this market?
(ii) If the production of each unit of this good gives rise to a social cost of $1, what is the socially optimal equilibrium quantity and price? Assume that producers pay a tax of $1 per unit.
(iii) If the production of each unit of this good gives rise to a social benefit of $5, what is the socially optimal equilibrium quantity and price? Assume that producers receive a subsidy of $5 per unit.