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3 Virtues of the Market [10 pts] Consider the market for gas given by the following inverse demand and inverse supply equations respectively: = 10
3 Virtues of the Market [10 pts] Consider the market for gas given by the following inverse demand and inverse supply equations respectively: = 10 -QD P = 2+Qs a. [5 pts) Find the competitive market equilibrium (P* and Q") and the consumer, producer, and social surplus for this equilibrium. Show graphically and label the consumer and producer surplus. b. 5 pts) If the government imposes a $1 tax on sellers, find the new equilibrium quantity, price the buyer pays, and price the seller pays. Find the consumer surplus (CS), producer surplus (PS), tax revenue (TR). social surplus, and dead weight loss (DWL) for this new equilibrium. Show graphically and label (CS, PS, TR, and DWL)
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