Easy supply demand with tax questoin help!! Consider the following market for an

Question

Easy supply demand with tax questoin help!!

Consider the following market for an ozone-depleting substance CFC-11. P is price per pound. Q is in thousand pounds. Regular demand function: Q-20-P Assume EPA imposes an escalating exercise tax on the CFC-11 producers. When EPA increases this tax from $3 to $6, the production of CFC-11 is reduced fromthousands pounds to the quantity when tax is $3 and the quantity when tax is $6) thousands pounds. (You need to find O 1) 18; O 2) 10; O 3) 9; O 4) none of the other answers are correct 5) 10: 8 8

Explanation / Answer

t = $3

Q = 20 - P (Demand)

Supply (with a tax = $3) : P = 2Q - 10 + 3

(At equillibrium Demand = Supply)

Solve for 'Q': 20 - Q =  2Q - 10 + 3

Q = 9

t = $6

Q = 20 - P (Demand)

Supply (with a tax = $6) : P = 2Q - 10 + 6

(At equillibrium Demand = Supply)

Solve for 'Q': 20 - Q =  2Q - 10 + 6

Q = 8

Option 3 is correct

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