The equations for the demand and supply curves for a particular product are P = 10 - .4Q and P = 2 + .4Q,where P is price and Q is quantity expressed in units of 100.After an excise tax is imposed on the product,the supply equation is P = 3 + .4Q.The equilibrium quantity after the excise tax is imposed is:

Question

Quizplus · Accepted Answer

To find the equilibrium quantity after the excise tax is imposed, we need to set the new supply equation equal to the original demand equation (since the quantity demanded and supplied at equilibrium must be the same):

3 + 0.4Q = 10 - 0.4Q

Solving for Q, we get:

0.8Q = 7

Q = 8.75 (in units of 100)

Therefore, the equilibrium quantity after the excise tax is imposed is 8.75*100 = 875 units, which corresponds to choice C.

The Equations for the Demand and Supply Curves for a Particular