Question Given a demand curve of P = 31 - 1.25Q and a supply curve of P= 4 +Q, with a tax of 18, solve for the resulting deadweight loss. Solution To solve this problem, you need to solve both for q* without the tax (12) and for q' with the tax (4). Then, the deadweight loss (DWL) is a triangle with base, q* - q* (8), and height equal to the tax, t (18). In this problem, the procedure yields DWL = 72. %3!

Question Given a demand curve of P = 31 - 1.25Q and a supply curve of P= 4 +Q, with a tax of 18, solve for the resulting deadweight loss. Solution To solve this problem, you need to solve both for q* without the tax (12) and for q' with the tax (4). Then, the deadweight loss (DWL) is a triangle with base, q* - q* (8), and height equal to the tax, t (18). In this problem, the procedure yields DWL = 72. %3!

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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