1.Assume that the NJ market for gasoline is initially in both short run and long run equilibrium.

a.What are economic profits? (3)

Now New Jersey increases gasoline taxes by $0.23 per gallon.

b.What will be the short run impact on the price that demanders pay and suppliers receive? Please explain briefly. (3)

c.Describe the long run equilibrium.In particular...

i.What are the resulting long run economic profits? (3)

ii.What has happened to the total quantity demanded of gasoline? (3)

iii.How much has the demand priced changed relative to the $0.23/gallon tax? (3)