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In a perfectly competitive market, the market demand curve is given by Qd = 1000-10P d , and the market supply curve is given by Qs = 30P s.
(a) Find the equilibrium market price and quantity (demanded and supplied), in the absence of any government intervention.
(b) Suppose the government imposes an excise tax of $40 per unit. Find the equilibrium price received by producers (P s ) and the equilibrium quality supplied (Qs ).
(c) How much deadweight loss results from the excise tax in (b)?
(d) Now suppose the government provides a subsidy of $20 per unit to all producers. Find the equilibrium price received by producers (P s ) and the equilibrium quantity supplied (Qs ).
(e) How much deadweight loss results from the subsidy in (d)?
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