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There are 10 identical consumers whose demand is D: p = 20 - 10q. There are 10 identical firms, each firm's marginal cost is MC(q)= 5 + 5q. The market is competitive.

a) derive the market demand function
b) derive the market supply function
c) what is the market equilibrium quantity and price?

An excise tax of $3 per unit is imposed on firms (you may introduce Pc and Pf where consumers face the price Pc and firms face the price Pf)

d) analyze the tax incidence. That is, how is the $3 excise tax divided between the firm and the consumers?

for part a) would I just multiple the demand function given D: p=20 -10q by 10?

thanks in advance for your help.

  • Economics -


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