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Problem 3 Consider a market for a good, in which the demand function D and the supply function 5 are linear: D 5 2,400 6193,
Problem 3 Consider a market for a good, in which the demand function D and the supply function 5 are linear: D 5 2,400 6193, 200 + 4195. Here, p3 denotes the price paid by the buyers and p5 denotes the price received by the sellers. These two prices are related through the tax t Z 0 that the government levies on each unit of the good: PS=PBf- Assume that the market is in equilibriumthat is, prices are such that supply equals demandfor any level of the tax. Compute the level of the tax that maximizes the government's tax revenues. Be sure to verify that you computed a maximum (as opposed to a minimum) by inspecting the second-order condition corresponding to the government's revenue-maximization problem. In this equilibrium, how much do buyers pay for each unit of the good? How much do sellers receive? How many units are traded
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