--%>
Assignment Help - homework help

Determine equilibrium quantity

Following equations denote market for widgets
Demand: P = 10 - Q Supply: P = Q - 4

Here P mentions the price in dollars per unit and Q mention the quantity in thousands of units. Assume the government has a change of heart regarding the importance of widgets to the happiness of the American public. The tax is eliminated and a subsidy of $1 per unit is granted to widget producers. Determine equilibrium quantity be? What price will the buyer pay? What amount per unit (by including the subsidy) will the seller attain? What will be the net cost to the government?
The original supply curve for widgets was P = Q - 4. Along with a subsidy of $1.00 to widget producers, the supply curve for widgets shifts outward. Remember that the supply curve for firm is its marginal cost curve. Along with a subsidy, the marginal cost curve shifts down by the amount of the subsidy. The new supply function is following:
                                                                           P = Q - 5.
To obtain the new equilibrium quantity, set the new supply curve equal to the demand curve:
                                                                           Q - 5 = 10 - Q, or Q = 7.5.
The buyer pays P = $2.50, and the seller attain that price plus the subsidy, that means, $3.50. Along with quantity of 7,500 and a subsidy of $1.00, the net cost of the subsidy to the government will be $7,500.

   Related Questions in Finance Basics

  • Q : Two Questions Question 1 An all equity

    Question 1 An all equity firm has a required return on its equity of 15%, has 10 million shares outstanding, and pays no taxes. The shares are currently trading at $6.00 each. The firm is planning to borrow $9 million at 5% interest rate and use the borrowed funds to buyback a portion of its equi

    		•
  • Q : Difference in annuities due or ordinary

    Normal 0 false false

    		•
  • Q : Define Legislature Legislature,

    Legislature, California: Two-house bodies of elected representatives vested with the accountability and power to make laws affecting the state (that is, except as limited by the veto power of the Governor).

    		•
  • Q : Assignments i want to write final state

    i want to write final state report. My state is Texas. You can use the resources that i attached, also you can use another resources to cover the outlines.

    		•
  • Q : Describe how firm search optimal level

    Describe how a firm find out the optimal level of current assets. The optimal level of working capital is finding out by determining the amount that balances the requirement for liquidity and for profitability.

    		•
  • Q : Influence of mergers on fees assessed

    What influence have mergers had on fees assessed for retail bank services? The effect is not clear. Market conditions and the level of competition often determine the cost for retail bank services.

    		•
  • Q : Explain marginal cost of capital

    Explain marginal cost of capital schedule (MCC)? Is the schedule always horizontal line? Describe. The marginal cost of capital schedule is graphic depiction of the weighted average cost of capital at distinct levels of financing. The MCC sch

    		•
  • Q : Compounded Quarterly In Financial

    1. If you deposit money today in an account that pays 4.3% annual interest, how long will it take to double your money? Round your answer to the nearest whole. years 2. Find the present value of the following ordinary annuities. Ro

    		•
  • Q : What is Cash Flow Statement What is

    What is Cash Flow Statement: It is a statement of cash receipts and disbursements for a particular time period.

    		•
  • Q : Excess reserves Normal 0 false false

    Normal 0 false false