1. Consider a market where the supply is given by QS = P and the demand is given by QD=20-P. (a) Suppose the government wants to raise 18Y by imposing per unit tax on this market. What tax rate will raise the required revenue and also mini- mize the dead weight loss? (b) What is the resulting equilibrium and the dead weight loss? What is the incidence of taxation? (c) Can you think of a method for raising 18Y from this market that will (1) incur no dead weight loss and (2) be preferable to the per unit tax for both the producers and the consumers.

1. Consider a market where the supply is given by QS = P and the demand is given by QD=20-P. (a) Suppose the government wants to raise 18Y by imposing per unit tax on this market. What tax rate will raise the required revenue and also mini- mize the dead weight loss? (b) What is the resulting equilibrium and the dead weight loss? What is the incidence of taxation? (c) Can you think of a method for raising 18Y from this market that will (1) incur no dead weight loss and (2) be preferable to the per unit tax for both the producers and the consumers.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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