Read each question carefully. Be sure to answer ALL of the questions. For full marks, show all your work and label your graphs.

1. Consider the market for hotdogs in California, where P = 10 - 0.5Qd & P

= 1 + 0.5Qs, where Q is one thousand hotdogs.

a. Graph supply & demand, and illustrate P* & Q*.

b. Calculate consumer surplus.

c. Calculate producer surplus.

d. Calculate total surplus.

e. Suppose a tax of $1 per hotdog is imposed on hotdogs in US. Illustrate this tax on a new graph, illustrating the change in P*&Q*.

f. Calculate the new consumer surplus.

g. Calculate the new produced surplus.

h. Calculate the deadweight loss due to the tax and illustrate it in the graph in Part E.

i. Calculate the government tax revenue from the tax.

2. Complete the following:

a. Provide an example of each of these types of goods. Your examples must be unique from the goods listed in Learning Activity 3.

• Private good
• Public good
• Club good
• Common resource good b. For each good, explain why it fits into the category of that type of good i.e. what characteristics makes it a public good, private good, club good or common resource good?