Briefly summarize the Coase Theorem (include the 3 key conditions). List the major types of approaches government
Fantastic news! We've Found the answer you've been seeking!
Question:
Briefly summarize the Coase Theorem (include the 3 key conditions).
- List the major types of approaches government typically takes to deal with negative externalities.
- Suppose the demand for cigarettes is represented by the equation P = 20 - .04Q and the supply is represented by P = 5 + .01Q where P is in dollars and Q is in billions.
- Using math and graphs determine and depict the equilibrium price and quantity.
- Illustrate on a graph and estimate mathematically the producer surplus and the consumer surplus.
- Cigarettes can cause negative externalities such as lung damage from second hand smoke and increased risks to non-smokers from fires. Suppose this negative externality works out to about $2 per package of cigarettes.
- Using math and graphs determine and depict how much over consumption of cigarettes is there?
- Illustrate on a graph and estimate mathematically what is the deadweight loss (DWL) from over consumption of cigarettes?
- If negative externalities were the only reason to tax cigarettes in this example what is the optimal level for an excise tax on cigarettes? Why is this optimal?
- With that tax what would be the new market price paid by consumers?
- With that tax what would be the new price received by sellers?
- With that tax what would be the estimated tax revenue?
- Cigarettes are also a leading cause of cancer. So many people want to tax cigarettes to discourage smoking. Thanks to this argument and the need for tax revenues suppose you raise the tax to $5 per package.
- What will be the new quantity?
- How much tax revenue will you get?
- What will be the new price to the consumers?
- What will be the new price to the sellers?
- Compare the producer surplus and consumer surplus to when there were no taxes.
- To get more tax revenues suppose you raise the tax from $5 to $10 per package, how much tax revenue would you get? Did this strategy to get more tax revenue work?
- If you raise the tax to $15 how much tax revenue will you get?
Related Book For
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr
Posted Date: