Question
Consider againthe market for a particular formulation of medicine used by a small number of medical cases. It's a specialized market, so we'll just have
Consider againthe market for a particular formulation of medicine used by a small number of medical cases. It's a specialized market, so we'll just have to assume we have enough buyers and sellers to have our demand and supply curves be straight, smooth lines. The following information applies to the market before any tax is applied:
Vertical intercept, demand curve: 40 Vertical intercept, supply curve: 10 Q* = 6 P* = 16
The government puts a tax on this medicine in the amount of $5 per unit. The price paid by buyers becomes $20 with the tax. With the tax, 5 units are sold. (These numbers are not very realistic - but just go with it.)
Calculate total market surplus with the tax applied.
Enter only numbers, a decimal point, and/or a negative sign as needed. Round your answer to two decimal places as necessary; when rounding on intermediate steps, use four places.
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