Question

Using the following information to calculate a)-n). Demand: P = 45- ½ Q Supply: P = 2Q

a) P*=_________

b) Q*=_________

c) Initial Consumer Surplus=__________

d) Initial Producer Surplus=__________

e) Total Surplus =_________________

Now the government imposes a $15 per unit tax on consumers. Calculate the following.

f) Tax Distorted Competitive Equilibrium Quantity=_____

g) Price (consumers pay with tax)=________

h) Price (producers get with tax)=________

i) Consumer surplus with tax=_________

j) Producer surplus after tax=__________

k) Tax Revenue=_____________

l) Total Surplus after tax=_____________

m) Deadweight Loss=____________

n) What parts above would change if it was a $15 tax on producers?__________________

Answer #1

Suppose that the demand equation: P = 6 – Q and supply equation:
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c. Suppose government imposes a unit tax of $1 on producers. Derive
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and quantity.
d. Calculate tax revenue and the deadweight loss of this tax.

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