Q.4 Suppose that the supply and demand for good H is described by the following equations:...

Transcribed Image Text:

Q.4 Suppose that the supply and demand for good H is described by the following equations: Q* =-150+0.40P The production of H also creates marginal external costs of $165 per unit of H. Assuming that H is sold in a competitive market, what is the market price? How many units of good H will be produced per year at that price? What is the socially efficient output of H? Will taxing H @12.5 percent be socially optimal? What alternate tax policy you can suggest to achieve social efficiency? Also calculate the incidence of each of the taxes. Q" = 600-0.2P Q.4 Suppose that the supply and demand for good H is described by the following equations: Q* =-150+0.40P The production of H also creates marginal external costs of $165 per unit of H. Assuming that H is sold in a competitive market, what is the market price? How many units of good H will be produced per year at that price? What is the socially efficient output of H? Will taxing H @12.5 percent be socially optimal? What alternate tax policy you can suggest to achieve social efficiency? Also calculate the incidence of each of the taxes. Q" = 600-0.2P

Answer rating: 100% (QA)

The market price of H product is 1250 and q... View the full answer