Determine equilibrium price and quantity

Reference no: EM1374408

The long run supply curve for a particular type of kitchen knife is horizontal line at a price of dolla three per knife. The demand curve for such a kitchen knife is

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] Suppose if a tax of $1 is imposed on each knife, what is the equilibrium output of such knives? (Suppose that the tax is collected by the government from suppliers of knives)

[C] After the tax is imposed, you buy such a knife for $3.75. Is this the long-run equilibrium price?

Reference no: EM1374408

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