Problem 3 and second attachment has highlighted question. Thanks f. Combine the total revenue function from problem 1 and total cost function from this problemand derive the profit-maximizing level of output and the price that would be charged.g. Why is the output level at this point smaller than the output level that maximizes totalrevenue?Problem 3:Squeak eClean produces commercial sanitizer used to clean tanker trucks that haul liquid foodproducts such as milk. This sanitizer a commodity like any other and at the wholesale level, thereare many domestic and foreign producers that compete vigorously. Suppose you have thefollowing estimated market demand and supply functions for the sanitizer.Qd=248.08 +2.2Y-0.6Pc+1.2 Ps - 4PQs = 10 +2PIn these equations, Q measures output in gallons per month (in 1,000's), P is the price per gallonof the sanitizer, Y is annual average household income (in 1,000's), Pc is an index of commodityprices, and Ps is the average price per gallon of other types of sanitizer.After gathering the latest data, you find that average household income is $36,400, the currentlevel of the commodity price index is 110.6, and the average price per gallon of other types ofsanitizers is $48.50.a. Find the current equilibrium price and quantity in this market.Qd=248.08+(2.2×36,400)-(0.6×110.6)+(1.2×48.50)-4P=248.08+80,080-66.36+58.2-4P-80,319.92-4PNow, determine the equilibrium price (P) by equating the market demand with the market supplyfunction.80,319.92-4P=-10P+2P6P -80,329.92P=13,388.32Determine the equilibrium quantity (Q) by substituting the value of Q in the market supplyfunction.Qs=-10+2P4 =−10+(2×13,388.32)=-10+26,776.64=26,766.64The equilibrium price and quantity are $13,388.32 and 26,766.64 respectively.b. Find the equilibrium price and quantity in this market if the government imposes a$9 per gallon tax on sanitizers.Qs -10+2P+9-1+2PDetermine the new equilibrium price (P) by equating the market demand with the new marketsupply function.80,319.92-4P = -1+2P-6P = 80,320.92P = 13,386.82Determine the new equilibrium quantity (Q) by substituting the value of Q in the new marketsupply function.Qs -1+(2×13,386.82)=-=-1+26,773.64=26,772.64The new equilibrium price and quantity are $13,386.82 and 26,772.64 respectively.c. What will happen to the price buyers pay per gallon as a result of the tax?After the tax is imposed, the price paid by the buyers falls. Before the tax, the price paid by thebuyers is $13,388.32 and after the tax, the price paid by the buyers falls to $13,386.82.d. What price will sellers receive (net price) per gallon after the tax?e. How much revenue will this tax raise for the government?Revenue collected by government is $732.f. How much of the tax burden is borne by buyers? How much is borne by sellers?The tax burden on consumer and seller is $4.665 and $4.335 respectively5

Taxes on goods and services work as revenue for the government. This is because the government…

e. d. What price will sellers receive (net price) per gallon after the tax? How much revenue will this tax raise for the government? Revenue collected by government is $732. f. How much of the tax burden is borne by buyers? How much is borne by sellers?

e. d. What price will sellers receive (net price) per gallon after the tax? How much revenue will this tax raise for the government? Revenue collected by government is $732. f. How much of the tax burden is borne by buyers? How much is borne by sellers?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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