The demand and supply in a market are represented by the equations P = 50 - .2QD and P = 20 + .3QS.A spillover cost in production equal to $2 per unit exists in this market.(a) What are the equilibrium price and quantity?
(b) What are the optimal price and quantity?
(c) How large must a specific tax in this market be to eliminate the market failure? Is the tax equal to the difference between the equilibrium price and the optimal price?

Question

Quizplus · Accepted Answer

The Answer of The demand and supply in a market are represented by the equations P = 50 - .2QD and P = 20 + .3QS.A spillover cost in production equal to $2 per unit exists in this market.(a) What are the equilibrium price and quantity?
(b) What are the optimal price and quantity?
(c) How large must a specific tax in this market be to eliminate the market failure? Is the tax equal to the difference between the equilibrium price and the optimal price?

The Demand and Supply in a Market Are Represented by the Equations