Externalities and Tax Incidence 1. Sketch a supply and demand framework for paved driveways. Who do you suppose is less elastic, consumers or sellers? Be sure your model reflects this (there are no wrong choices of who is less elastic; just take your pick if you don't have a good idea). 2. Assuming that impervious surfaces are damaging to waterways, include a new supply curve into your model that reflects all costs of production. 3. Suppose a tax is imposed on the buyers of driveways. Suppose the tax is exactly the right amount to make the quantity achieved equal to the new equilibrium. Sketch the change(s) to the market with your tax imposed. Identify the losses to consumers and suppliers, dead weight loss and government revenue. Discuss dead weight loss in this context. 4. What will likely to happen to employment in the production of driveways? Why? 5. What other policy alternatives, generally, are available to address the externality?

Externalities and Tax Incidence 1. Sketch a supply and demand framework for paved driveways. Who do you suppose is less elastic, consumers or sellers? Be sure your model reflects this (there are no wrong choices of who is less elastic; just take your pick if you don't have a good idea). 2. Assuming that impervious surfaces are damaging to waterways, include a new supply curve into your model that reflects all costs of production. 3. Suppose a tax is imposed on the buyers of driveways. Suppose the tax is exactly the right amount to make the quantity achieved equal to the new equilibrium. Sketch the change(s) to the market with your tax imposed. Identify the losses to consumers and suppliers, dead weight loss and government revenue. Discuss dead weight loss in this context. 4. What will likely to happen to employment in the production of driveways? Why? 5. What other policy alternatives, generally, are available to address the externality?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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