(15 points) The market for a given product is governed by the following two equations d d Q =10 0.5P + = 0, 2 2 , 2 s s s s whenP P whenP Q where Qd is the quantity demanded (millions of units per year) when price consumer pay is P, and Q is the quantity supplied (millions of units per year) when the price producer receive is P. The last line of the supply equation indicates that nothing will be supplied if the price producers receive is less than $2 per unit. Thus for prices between zero and $2, the supply lies on the vertical axis. a) What are the equilibrium price and quantity? Illustrate in a diagram. b) What are consumer and producer surplus at the equilibrium price and quantity? c) Suppose the government imposes an excise tax of $3 per unit. What will the new equilibrium quantity be? What price will buyers pay? What price will sellers receive? Illustrate in a diagram d) Calculate government revenue.

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