6. (10 pts.) Assume you are the manager of Faygo (Michigan's own soft drink!), where the...
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6. (10 pts.) Assume you are the manager of Faygo (Michigan's own soft drink!), where the monthly demand for Faygo at the local gas station is QD-600-800P and the supply function (including sales tax) is Q³=600P-100. a. Solve for equilibrium price and quantity at the local gas station. b. After seeing the most recent health statistics, Michigan's congress realizes Michigan residents have a problem with obesity. Wanting to do their part to fight obesity, congress decides their best option is to place a tax on sugary drinks. They decide to impose an excise tax of $0.10 on each soft drink sold in Michigan. How will the imposition of the sugar tax impact the equilibrium price and quantity of your product? c. Are you happy about this new tax? Explain. d. If the Michigan soda lobby convinces congress not to impose this tax on Michigan-made products (i.e., still taxing Coca-Cola and Pepsi products), how do you expect this to affect the equilibrium price and quantity of your product (no explicit number needed)? Explain. 6. (10 pts.) Assume you are the manager of Faygo (Michigan's own soft drink!), where the monthly demand for Faygo at the local gas station is QD-600-800P and the supply function (including sales tax) is Q³=600P-100. a. Solve for equilibrium price and quantity at the local gas station. b. After seeing the most recent health statistics, Michigan's congress realizes Michigan residents have a problem with obesity. Wanting to do their part to fight obesity, congress decides their best option is to place a tax on sugary drinks. They decide to impose an excise tax of $0.10 on each soft drink sold in Michigan. How will the imposition of the sugar tax impact the equilibrium price and quantity of your product? c. Are you happy about this new tax? Explain. d. If the Michigan soda lobby convinces congress not to impose this tax on Michigan-made products (i.e., still taxing Coca-Cola and Pepsi products), how do you expect this to affect the equilibrium price and quantity of your product (no explicit number needed)? Explain.
Expert Answer:
Answer rating: 100% (QA)
a To find the equilibrium price and quantity we need to equate the demand and supply functions Demand function Qd 600 800P Supply function Qs 600P 100 ... View the full answer
Related Book For
College Accounting
ISBN: 978-1111528126
11th edition
Authors: Tracie Nobles, Cathy Scott, Douglas McQuaig, Patricia Bille
Posted Date:
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