Consider a perfectly competitive market with Market demand function: Qd = 1000 - 2P Market supply...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Consider a perfectly competitive market with Market demand function: Qd = 1000 - 2P Market supply function: Q* = 2P a. Suppose there is no sales tax. What is the equilibrium price and equilibrium quantity? What is the consumer surplus and producer surplus? b. Now suppose the government imposes a sales tax of $50 per unit on consumers. What is the new equilibrium price and equilibrium quantity? What is the new consumer surplus and producer surplus? What is the tax revenue? c. Show your answer in a) and b) in a well labelled diagram (Place the total quantity on the horizontal axis and the market price on the vertical axis). Discuss the effect of the sales tax on the market efficiency. Consider a perfectly competitive market with Market demand function: Qd = 1000 - 2P Market supply function: Q* = 2P a. Suppose there is no sales tax. What is the equilibrium price and equilibrium quantity? What is the consumer surplus and producer surplus? b. Now suppose the government imposes a sales tax of $50 per unit on consumers. What is the new equilibrium price and equilibrium quantity? What is the new consumer surplus and producer surplus? What is the tax revenue? c. Show your answer in a) and b) in a well labelled diagram (Place the total quantity on the horizontal axis and the market price on the vertical axis). Discuss the effect of the sales tax on the market efficiency.
Expert Answer:
Related Book For
Microeconomics
ISBN: 9781464146978
1st edition
Authors: Austan Goolsbee, Steven Levitt, Chad Syverson
Posted Date:
Students also viewed these accounting questions
-
Total surplus is maximized at the equilibrium price and quantity. When demand increases, price increases. Explain how total surplus is still maximized if price increases due to an increase in demand.
-
What would happen to the equilibrium price and quantity exchanged in the following cases? a. An increase in income and a decreasing price of a complement, for a normal good b. A technological advance...
-
The following graph shows the equilibrium price and quantity in the market for chewing gum in the country Argonia. Suppose the government of Argonia passes a bill to impose a tax of $2 on the...
-
What is the result of executing the Clownfish program? A. The code compiles and prints swim! B. The code compiles and prints fish! C. The code compiles and prints a stack trace. D. One line of the...
-
Define economics. Explain briefly how the economic way of thinking-in terms of rational, self interested people responding to incentives- relates to each of the following situations. a. A student...
-
What is the drum-buffer-rope (DBR) concept and what does it have to do with the TOC?
-
Daphne Brown-Wright worked as a teacher for East St. Louis School District 189 from 1975 until 1998 and then returned as an administrator from 2002 until 2012, thus serving the District for 33...
-
Relevant-cost approach to pricing decisions. Burst, Inc., cans peaches for sale to food distributors. All costs are classified as either manufacturing or marketing. Burst prepares monthly budgets....
-
Matt has worked as an electrician for 24 years with the same company and is about to retire. He has a final-earnings pension plan. His pension benefit will be 1% per year based on the average of his...
-
Consider a two-date economy where there are three states of the world at date 1. There is a risky asset and a risk-free asset. The pay-off of the risky stock at date 1 will be $3, $6, or $4, and it...
-
A researcher reports that "the mean score for women (M=8.6, SD= .4) was higher than the mean score for men (M=6.5, SD= .4)." What statistic is she telling you about?
-
There is current debate in many nations over the private use of public lands. How do you think classical liberals and modern liberals would differ over the issue of logging in the national parks?
-
In the country where you live, what aspects of the government resemble capitalism? What aspects resemble socialism? Are there aspects of other systems of government?
-
In Delhi, a haircut costs 135 rupees (INR). The same haircut costs 15 Singapore dollars (SGD) in Singapore. At an exchange rate of 50 INR per SGD, what is the price of an Indian haircut in terms of a...
-
Using economic reasoning, explain why it might not be appropriate for a rich suburb to dump its trash in a poorer area.
-
Which of the following are potentially valid arguments for tariffs or export subsidies, and which are not? Explain your answers. a. Dairy producers earning in Wales are at their lowest peak despite...
-
Draw and label a diagram to help solve the related-rates problem. The side of a cube increases at a rate of 1 m/s. Find the rate (in m/s) at which the volume of the cube increases when the side of...
-
Draw two scatterplots, one for which r = 1 and a second for which r = 21.
-
To assist in ensuring adequate and affordable health care for all, the federal government has mandated that health insurers provide health insurance to all, regardless of their physical condition....
-
Suppose that only one person in the world sells ice cream. He employs a strange pricing policy: You can buy 1 ice cream cone for $1, but if you buy 2 cones, you have to pay $2 each. If you buy 3, you...
-
Suppose that there are two goods (X and Y). The price of X is $2 per unit, and the price of Y is $1 per unit. There are two consumers (A and B). The utility functions for the consumers are UA(X,Y) =...
-
The Pure Food and Drug Act of 1906 is known as Dr. Wileys Law. It is generally regarded by non-economic historians as representing the triumph of consumer interests over producer interests. a. Why...
-
The elasticity of the supply of labor in part determines who bears the burden of Social Security taxes. Those taxes are typically levied in matching 6.2 percent shares on workers wages and wages paid...
-
When the price of ketchup rises by 18 percent, the demand for hot dogs falls by 2 percent. a. Calculate the cross-price elasticity of demand. b. Are the goods complements or substitutes? c. In the...
Study smarter with the SolutionInn App