Suppose the market for product X is described by the following equations. QD=600-2P and QS= -150+3P, where P is price in dollars and Q is the quantity in thousands.Calculate the equilibrium price and quantity in a free market.Now suppose that the government pays a subsidy of $20 per unit of product X. Calculate the buyer's price, the seller's price, and the equilibrium quantityWhy does a tax create a deadweight loss? What determines the size of this loss

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Answered: Suppose the market for product X is…

Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781305971509

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Supply, Demand, And Government Policies

Section: Chapter Questions

Problem 10PA

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Suppose the market for product X is described by the following equations. Q_D=600-2P and Q_S= -150+3P, where P is price in dollars and Q is the quantity in thousands.

1. Calculate the equilibrium price and quantity in a free market.
2. Now suppose that the government pays a subsidy of $20 per unit of product X. Calculate the buyer's price, the seller's price, and the equilibrium quantity
Why does a tax create a deadweight loss? What determines the size of this loss

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