# equilibrium demand price level

The inverse demand curve for a commodit market is P=180-Q. The inverse supply curve is MC=Q. Based on this information:

a) What is the equilibrium price level if this market is competitve?

b) What is equilibrium quantity level if this market is competitive?

c) What is equilibrium price level if this market is monopolized?

d) What is equilibrium quantity level if this market is monopolized?

e) What is the net economic efficiency cost of the monopoly market compared to the competitive market baseline?

Now suppose a unit tax is imposed of 20 per unit.

f) What is the equilibrium demand price level in the competitive market when this 20 unit tax is imposed?

g) What is the equilibrium quantity in the competitive, when this 20 unit tax is imposed?

h) What is the net efficiency cost of the tax, relative to the pre-tax status quo in the competitive market

Now going to the monopoly market:

i) What is the equilibrium demand price level in the monopoly market when this 20 unit tax is imposed?

j) What is the equilibrium quantity in the monopoly market when this 20 unit tax is imposed?

Please see attachment for (k), (l) and (m)

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#### Solution Summary

This job explores equilibrium demand price level.

Aggregate Demand & Supply

The following are labor Demand and labor supply curves for the economy,

Nd= 250 - 2(W/P)

Ns= 3(W/P)

Calculate the equilibrium real wage rate and the equilibrium quantity of labor.

(b) Suppose that the nominal wage rate equals 60. In the short-run, aggregate demand and aggregate supply are equal at a price level of 1.0 Compute the real wage rate. Explain where actual real out-put is relative to natural real output. Suppose that policymakers change aggregate demand so that in long-run equilibrium, the nominal wage rate stays at 60. What is the long-run equilibrium price level? Explain whether policymakers took actions that increased or decreased aggregate demand.

Suppose that the nominal wage rate equals 56. In the shot-run, aggregate demand and aggregate supply are equal at a price level of 1.4. Calculate the real wage rate. Where is actual real output relative to natural real output. Given the aggregate demand curve, suppose that in long-run equilibrium the price level equals 1.6. Calculate the value of the nominal wage rate that equates the demand for and supply of labor. How does the nominal wage rate change the SAS curve shift as the economy adjusts from its current short-run equilibrium to the new long-run equilibrium?

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