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Consider the following general demand and supply functions for a given commodity.
i. Find the equilibrium price and quantity.
ii. Suppose that a fixed tax t is imposed on the product in question, what is the new equilibrium price and quantity.
iii. Express the value of t in terms of a, b, c, d, and p.
iv. Use iii. Above to write the expression for government revenue.
v. Suppose that instead of a fixed tax, the government decides to set a non-binding price floor equal to . How many units will be supplied and how many units will be demanded to ensure optimal quantities?
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