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Double Auctions Consider a double auction set-up with the following values and costs: Buyer : 7 5 3 1 Seller : 2 4 4 6

Double Auctions Consider a double auction set-up with the following values and costs: Buyer : 7 5 3 1 Seller : 2 4 4 6 (a) Find all market-clearing quantities and prices. (b) Find total (consumer plus producer) surplus. (Hint: recall that a consumer willing to pay v gets surplus v - p, and analogously, a producer willing to sell for c gets surplus p - c. CS is the surplus sum across all consumers who buy, and PS is the surplus sum across all sellers who sell). (c) Now suppose that the government imposes a $1 tax on sellers - any seller who sells must pay $1 to the government. What are the new equilibria, and how does total surplus (consumer + producer + government) change from (b)

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