7. Incidence and Welfare Effects of a Tax The demand and supply curves for the perfectly competitive thingamajig market are: Demand (D): P = 12 - Q Supply (S): P = 3+ 0.5Q a. Calculate the market equilibrium quantity and price. Q* = %3D P* = b. Calculate consumer surplus, producer surplus, and total surplus in the market equilibrium. CS* = %3D PS* = Total surplus = CS* + PS* = %3D C. Suppose the government imposes a specific tax (excise tax) of t = $1.50 on sellers of thingamajigs. Write the new supply equation (STAX). P =

7. Incidence and Welfare Effects of a Tax The demand and supply curves for the perfectly competitive thingamajig market are: Demand (D): P = 12 - Q Supply (S): P = 3+ 0.5Q a. Calculate the market equilibrium quantity and price. Q* = %3D P* = b. Calculate consumer surplus, producer surplus, and total surplus in the market equilibrium. CS* = %3D PS* = Total surplus = CS* + PS* = %3D C. Suppose the government imposes a specific tax (excise tax) of t = $1.50 on sellers of thingamajigs. Write the new supply equation (STAX). P =

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter7: Market Efficiency And Welfare

Section: Chapter Questions

Problem 9P

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