The Demand and Supply in a Market Are Represented by the Equations

question 35

Essay

The demand and supply in a market are represented by the equations P = 50 - .2Q_D and P = 20 + .3Q_S.A spillover cost in production equal to $2 per unit exists in this market.
(a)What are the equilibrium price and quantity?
(b)What are the optimal price and quantity?
(c)How large must a specific tax in this market be to eliminate the market failure? Is the tax equal to the difference between the equilibrium price and the optimal price?

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Definitions:

Role

A set of expectations (norms) about a social position, defining how those in the position ought to behave.

Cognitive Dissonance

A state of conflict or discomfort experienced when holding contradictory beliefs, values, or attitudes.

Attribution

The process by which individuals explain the causes of behavior and events.

Attitude

A psychological construct representing an individual’s degree of like or dislike for an item, which influences their reactions and decisions.