Fall 2012 Final Exam

7. Suppose the market for widgets can be described by the following equations:Demand: P = 18 − 1.00QSupply: P = 1.00Q − 4P is the price in dollars per unit and Q is the quantity in thousands of units.a. What is the equilibrium price and quantity? (2 marks)b. Suppose the government imposes a tax of $1 per unit. What will be the newequilibrium quantity? What price will the buyer pay? What amount per unit willthe seller receive? (4 marks)14