Suppose there is a market that has market demand characterized as X = 30 - P/3. Suppose further that market supply can be written as X = P/2 - 2.
(A) Find the equilibrium price and quantity in this market.
(B) If a unit tax of $16 is imposed on good X, what are the equilibrium price, quantity, and tax
revenue in the market?
(C) Suppose an ad valorem tax of 30 percent is imposed on good X. The after-tax demand equation would be X = 30 - P/2. Now find the equilibrium price, quantity, and tax revenue in
the market.
(D) What can be said about the amount of tax revenue generated under each taxing scheme,
and why?
(A) Setting supply equal to demand and solving yields P* = $38.4 and X* = 17.2.
(B) The after-tax demand curve is now P = 74 - 3X. Setting after-tax demand equal to supply
yields X* = 14, P* = $32 for suppliers, and P* = $48 for consumers. Tax revenue is $224.
(C) Setting the given after-tax demand equal to supply yields P* = $32 for suppliers and P* =
$48 for consumers. Tax revenue is $224.
(D) The tax revenue and prices are the same using either taxing scheme.
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Refer to the figure above. What is the initial equilibrium employment and wage rate?
A) 10 units of labor and $25 B) 20 units of labor and $25 C) 30 units of labor and $15 D) 10 units of labor and $35
A country reports exports minus imports of $300 billion, net interest income of $30 billion, net transfers of $50 billion, and no change in official reserves. The country is a
A) net liability. B) net borrower. C) net lender. D) debtor nation. E) net asset.
In the United States, the inflation rate has
A) remained almost constant over the past 25 years. B) risen and fallen since the 1970s. C) fallen as a result of OPEC oil price hikes. D) risen constantly over the past 30 years.
If inflation in Russia is higher than it is in the United States,
A) the value of the dollar will rise in the long run. B) the purchasing power of the ruble in buying Russian goods will rise relative to the dollar. C) the value of the ruble will rise in the long run. D) Both A and C are correct.