The local Madison market for baby cribs is described by the…
The local Madison market for baby cribs is described by the following supply and demand equations Demand: P = 400 -10Q Supply: P = 100 + 5Q Where P is the price per crib and Q is the quantity of cribs. a. Given this the information on the cribs market, find the equilibrium price and quantity of cribs. Equilibrium Price is P = Equilibrium Quantity is Q = b. What is the consumer surplus (CS) and producer surplus (PS) in the cribs market? CS = PS = c. Suppose the local government in Madison decides to impose an excise tax of $60 per crib on the crib producers. Given this tax, what is the new supply curve in this market now that producers have an additional cost from the tax? Answer: New supply curve is: d. Given the above excise tax on producers, what is the new equilibrium price in the market for cribs? What is the tax revenue that the government receives from implementing the tax? What is the deadweight loss (DWL) due to the tax? Answer: New equilibrium price is: P = Tax Revenue = DWL =