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Question: In Country Faraway, cigarettes are forbidden, so people trade cigarettes in a blackmarket. The cigarette demand is QD = 12 - P , and the cigarette supply is Qs= 2P.
a. Find the equilibrium price and quantity in the black market.
b. The government becomes aware of the black market and reinforces the police sothat half of the cigarette supply would be seized and destroyed. Under thiscircumstance, what are the demand and supply functions? What is the new equilibrium price and quantity? Show the change by using a supply and demanddiagram.
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