Suppose that the market for gasoline is perfectly competitive, with a demand given by P = 240 - Q, and a supply given by P = 20 + 2/3 Q. The government is considering implementing a $20 per unit tax on gasoline, to be collected by the seller.
a. Sketch and label a graph depicting the situation described above.
b. Solve for the equilibrium price and quantity prior to the implementation of the tax.
c. Solve for the quantity sold with the tax imposed, as well as the price paid by the buyer, the price the seller receives, and
d. Determine the tax burden (incidence), government tax revenue, and deadweight loss associated with the tax.