Example 5. Maximizing Tax Revenue. Suppose the demand and supply functions for a product are p = 2800-8q-q/3 and p = 400+2q respectively, where p is in dollars and q is the number of units. Find the tax t that will maximize the tax revenue T, and find the maximum tax revenue.

Example 5. Maximizing Tax Revenue. Suppose the demand and supply functions for a product are p = 2800-8q-q/3 and p = 400+2q respectively, where p is in dollars and q is the number of units. Find the tax t that will maximize the tax revenue T, and find the maximum tax revenue.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: The vertical distance between points A and C represents a tax in the market. Price P4 Supply P3 B P2…

A: The equilibrium price in a market is determined by the forces of demand and supply. The equilibrium…

Q: When the price is 10 TL for each pack of cookies, the supply is 250 thousand and the demand is 120…

A: In the production process, the conditions and fluctuations that happen between demand and the supply…

Q: Figure 2-1 20 arice 18 16 14 12 10 6. 10 20 30 40 50 60 70 80 quantity

Q: Given the following information QD = 240-5p QS = P Where QD is the quantity demanded, Qs is the…

A: Given, QD = 240-5P QS = P Tax on sellers = $12 per unit

Q: Show that given a linear demand schedule and constant marginal cost, the excise tax will lead to a…

A: market is in equilibrium where demand and supply are equal . the process of getting equilibrium is…

Q: QD = 240-5p QS = P Where QD is the quantity demanded, Qs is the quantity supplied and P is the…

A: Tax imposed on sellers would result in seller get less amount that what the buyer pays. The buyers…

Q: Given the following information QD = 240 – 5P QS = P where QD is the quantity demanded, QS is the…

A: Given, The demand curve, QD = 240 – 5P The supply curve, QS = P Tax amount = T= $12 Before tax,…

Q: The tax-inclusive price of a carton of cigarettes in Canada is $100 per carton. Per capita…

A: Per capita tax revenue is the amount of tax amount collected by government on per person , this is…

Q: If a tax were placed on fruits, which of the following would be true about the burden of the tax? a.…

A: When we talk about the burden of a tax and how it is distributed between consumers and producers,…

Q: m, p is the per uniL I GOna he number of units. If the weekly demand function is p= 38 - q and the…

A: The consequences of taxation imposed by the government in a free economy are as follows – It…

Q: Suppose supply is P= 4 + (1/4)Qs and demand is P= 58 ―(1/2)Qd. Suppose at the market equilibrium,…

A: Given At equilibrium, Price elasticity of demand Ed=109 Price elasticity of supply: PS=59 Formula…

Q: Given the following information: QD- 240-5P QS= P Where QD is the quantity demanded, QS is the…

A: According to the question given that the supply and demand function for the market. QD = 240 – 5P QS…

Q: 9. The demand and supply functions for product x are given, respectively, by the equations: P-83.6-…

A: “Since you have asked multiple questions, we will solve the first question for you. If you want any…

Q: Suppose that the demand and supply functions for a good are given as follows: Demand: Qº = 720 – 8P…

A: Given: Demand, Qd=720-8PSuppply, Qs = -160+3P

Q: b) Consider the following demand and cost functions TC = Q² + 6Q P = 25 – 3Q Suppose the government…

A: Profit maximization refers to the production and distribution of goods in such a way that maximizes…

Q: In the following table, indicate which areas on the previous graph correspond to each concept. Check…

A: Here we can see that the economy was an equilibrium at the point where the demand and supply curves…

Q: Assume that the demand for food is relatively inelastic and the demand for jewelry is relatively…

A: Answer: If the same tax is imposed on the goods having elastic and inelastic demand then the good…

Q: With a tax of Rs4/unit,the price of the good rises from Rs5/unit to Rs9/unit. Which of the following…

A: The market price of a good was Rs5 (before tax) It means the price paid by consumer (before tax) is…

Q: If a tax of $1.20 is imposed on consumers in this market, what is the tax revenue?

Q: Question 29 Given the following information OD - 240 - SP QS P where QD is the quantity demanded. QS…

A: Given in the question: QD=240-5P QS = P Tax Imposed: t = $12 To find: Tax Revenue.

Q: Suppose the following demand and supply function of a commodity.…

A: Suppose the following demand and supply function of a commodity. Qd = 55 - 5P Qs = -50 + 10P…

Q: The market demand is Qd=12 - 0.04P The market supply is Qs=3.8P + 4 Supposed each unit is taxed…

A: Given, Market demand: Qd=12 - 0.04P Market supply: Qs=3.8P + 4 Each unit is taxed $0.25.

Q: Given the following information: QD= 240-5P QS= P Where QD is the quantity demand, QS is the…

A: Producer surplus refer to the difference between the minimum acceptance price of the producer and…

Q: TRUE OR FALSE. If the price elasticity of demand is 2 while the price elasticity of supply is 2, the…

A: Tax incidence studies the division of tax burden between buyers and sellers. Formula Tax burden on…

Q: Demand for a product is described by the price-quantity curve p = 225 0.2g and supply is described…

A: We are given: Demand: Pd = 225 - 0.2 q1/2Supply: Ps = 45 + 0.2 q1/2

Q: The graph below shows the supply and demand curves in the soft drink market. If the government…

A: The intersection of the supply and demand curves represents the market equilibrium, where the…

Q: Consider a market in which the demand curve is P = 12 -Q and the supply curve is P = 2 + Q. Suppose…

A: Demand curve P = 12 -Q Supply curve P = 2 + Q At equilibrium point, demand = supply => 12 -Q = 2…

Q: A tax on a good with perfectly inelastic demand causes the price to rise and the supply to shift tP…

A: In the free markets, the prices of the goods and services are determined by the forces of demand and…

Q: Suppose the equilibrium price in a market is $4. If a $4 per-unit tax is levied on the market, the…

A: The tax burden can be divided between sellers and buyers depending on the elasticity of supply and…

Q: pu = 50 - 2Q pS = 10 + 1Q Where prices are expressed in cents. How would you modify the equations to…

A: Supply and demand, in economics, relationship between the quantity of a commodity that producers…

Q: Suppose that a certain product has the following demand and supply functions. Demand: p=0.04g + 95…

Q: Given the following information QD = 240-5p QS = P Where QD is the quantity demanded, Qs is the…

Q: Given: Qd = 240 - 5P Qs = P Where Qd is the quantity demanded, Qs is the quantity supplied and P…

A: Given, Qd = 240 - 5P Qs = P Tax on supplier = $12 per unit

Q: Suppose that in a certain market the demand function for a product is given by p= -8q + 2800 and the…

A: We find the equilibrium Price and Quantity after the tax levied -

Q: Given the demand and supply functions for a particular commodity: QD 294.7-4.963P Qs 139.6 +21.34P…

A: Qd = 294.7 - 4.963P Qs = 139.6 + 21.34P

Q: given the following information Qd=240 -5p and Qs= P Where Qd is the quantity demanded and Qs is the…

A: A market is a place where the goods and services are exchanged between the buyers and sellers after…

Q: The supply and demand curves for sugar are given by the following: P= 10+2Q (Supply) P=40-2Q…

A: Supply curve : P = 10+2Q Demand curve : P = 40-2Q At equilibrium, Demand = Supply 10+2Q = 40-2Q

Q: Explains it correctly Q)Elasticity of demand and supply is both 1.23. Will the consumers pay more…

A: The concept of elasticity is used in both demand and supply to determine the extend by which…

Q: the demand for a product is inelastic but the supply is elastic, the ________ will bear the tax…

A: The burden of tax on consumers and producers is decided by the elasticity of demand and supply. The…

Question

6 of 11
Example 5. Maximizing Tax Revenue.
Suppose the demand and supply functions for a product are p = 2800-8q-q/3 and p = 400+2q respectively,
where p is in dollars and q is the number of units. Find the tax t that will maximize the tax revenue T, and find
the maximum tax revenue.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

(a) The supply and demand equations for a good are p-2q = 1 and p+ 2q = 9, respectively. Find the equilibrium price and quantity. A percentage [of the price] tax of 100r% is imposed. Find the new equilibrium price and quantity. What fraction of the tax paid has been passed onto the consumer? (b) If an asset is purchased at some initial time t = 0 for $200 and sold at some time t > 0 in the future, the value of the sale is given by P(t) = (2t² + 14t+200)e-¹/10, dollars. Find the stationary points of P(t) and determine their nature. Should the asset be purchased and, if so, when is the best time to sell it? [Hint: The fact that e> 2.7 may be useful.]
The equilibrium price of a good is $9. The demand for this good is more elastic than the supply. Suppose the government introduces a tax on the good. In this case, the price paid by consumers is $13, and the price received by producers is 3.25 times less. Calculate the tax cost per good for the group bearing most of the tax burden
Consider a market with the following demand and supply curves: Q (p) = 20 – 2P Q (p) = - 10 + 3P (b)Suppose the government imposed a sales tax of $0.80 per unit of output sold, find the price paid by the consumer, the price received by the supplier, the equilibrium quantity transacted, and the total tax revenue received by the government. (c)What do you think is the purpose for such tax policy? In your explanation, include a brief discussion of the importance of price elasticity of demand in the choice of commodities to be taxed in order to achieve specific policy goal(s).
The short-run market demand and supply curves for good X are as follows: QD = 20 - 4P QS = 7 + 2.5P What is the after- or post-tax quantity? What is the total revenue after the imposition of the quantity or specific tax? How much of the tax do consumers pay (in percent)? How much of the tax do producers pay (in percent)?
The following graph represents the demand and supply for pinckneys (an imaginary product). The black point (plus symbol) indicates the pre-tax equilibrium. Suppose the government has Just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario. Demand Supply 16, 18 21.00 18.00 15.00 QUANTITY (Pinckneys) Complete the following table, given the information presented on the graph. Result Value Per-unit tax $6.00 Equilbrium quantity before tax Price producers recelve before tax $18.00 In the following table, indicate which areas on the previous graph correspond to each concept. Check all that apply. Concept D. Deadweight loss after the tax is imposed Consumer surplus after the tax is imposed Producer surplus before the tax Is imposed PRICE (Dotars per pinckney) 口□□
Question 2: Imposing a single-stage tax Assume that there are 1000 importers and manufacturers, 2,000 wholesalers, and 10,000 retailers. Each manufacturer (importer) has sales of $30,000,000 which is sold equally across wholesalers, and wholesalers put a 20% markup on the price before selling to retailers Then the goods are resold equally to 10,000 retailers and the retailers impose a 25% markup on it. Suppose the government needs to raise 4.5 billion with a single- stage sales tax, a. What would be the rate of tax the government needs to impose on the sales of importers and manufacturers to achieve the revenue target. b. What would be the rate of tax the government needs to impose on the sales of wholesalers to achieve the revenue target?
Suppose a firm has demand and supply are given by: Qd = 17−  2Px and Q s = 4Px  − 1 c. How much tax revenue does the government earn with the $12 tax when the new equilibrium quantity is 2 units after tax .
The state of Colorado's excise tax on beer is 8 cents per gallon. Suppose that the excess burden created by this tax is $40 million. If the tax is increased from 8 cents to 12 cents per gallon, what will be the new excess burden in this market? (The answer is $90 million)
suppose demand is given by q d(p)=1-p and supply q s(p)=p with prices in dollars.if buyers pay a 10 cent tax what is the after tax demand?
Given: Qd = 240 - 5P Qs = P Where Qd is the quantity demanded, Qs is the quantity supplied and P is the price. Suppose the government decides to impose a tax of $12 per unit on sellers in this market. Determine: A) The consumer surplus after tax B) The producer surplus after tax C) The tax revenue
Suppose the following demand and supply function of a commodity. Qd = 55 - 5P Qs = -50 + 10P After imposing tax, the new supply function is Qs = -60 + 10P Find out the equilibrium price and quantity before tax. Find consumer and producer surplus before tax. Determine government revenue and dead weight loss after tax
In the market for candy, researchers have estimated the following demand and supply curves. Demand: P= 8 - Q/100 Supply: P= (3Q)/700 If the government imposes an excise tax of $0.50 per unit. What is tax revenue out of this tax? (Remember that the tax does not change the demand and supply curves).