Suppose that the supply curve forbeer is given by QS=20+4P andthe demand for beer is given byQD=50-6P, where P is price. Thegovernment imposes a tax of $2per unit on the consumer.Determine:(i) The pre-tax and post-taxequilibrium price of beer.(ii) The tax burden borne byproducer and consumer(iii) The deadweight loss (DWL) ofthe tax, given DWL=0.5AQAP,where AQ and AP is, respectively,the change in quantity and priceas a result of the tax.

Part (i): The pre-tax and post-tax equilibrium price of beer. Pre-tax Equilibrium: Supply Curve: QS…

Answered: Suppose that the supply curve for beer…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In Figure 3.7, applying a $1.05 specific tax causes the equilibrium price to rise by 70¢ and the equilibrium quantity to fall by 14 million kg of pork per year. Using the pork supply function and the original and after-tax demand functions, derive these results using algebra. Figure 3.7
Suppose that a market is initially in equilibrium. The initial demand curve is P=90-Qd The initial supply curve is P-2Qs. Suppose that the government imposes a $3 tax on this market. What is the dead-weight loss due to the tax? a) $1.50 b) $3 c) $1.00 d) $2
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Suppose households supply 500 billion hours of labor per year and have a tax elasticity of supply of 0.16. If the tax rate is increased by 19.6 percent, by how many hours will the supply of labor decline? a) 28.67 billion b) 1.568 trillion c) 2.465 trillion d) 3.422 trillion e) 9.183 trillion
If the demand for automobiles is price elastic and an excise tax is levied on sellers of automobiles that causes a 10% increase in the price of automobiles paid by buyers, then: The quantity demanded of automobiles will decrease by more than 10% and buyers will bear a proportionally larger share of the direct burden of the tax than sellers. The quantity demanded of automobiles will decrease by more than 10% and sellers will bear a proportionally larger share of the direct burden of the tax than buyers. The quantity demanded of automobiles will decrease by less than10% and total revenues from auto sales will increase. The quantity demanded of automobiles will decrease by less than 10% and total revenues from auto sales will decrease.
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 $13, and the price received by producers is 3.25 times less. Calculate the tax cost per good for the group bearing most of the tax burden
The demand and supply schedule for coffee are: Price ($ per cup) Quantity Demanded Quantity Supplied $1 130 10 $2 110 20 $3 90 30 $4 70 40 $5 50 50 $6 30 60 $7 10 70 $8 0 80 a) If there is no tax on coffee, what is the price and how much coffee is consumed b) What is the consumer surplus? Show your calculations c) What is the price elasticity of demand when the price goes up from $3 to $4 dollars? Is the demand for coffee elastic or inelastic? Explain.
If the burden of a tax on sugary drinks is borne mostly by consumers, it must be the case that: a) The demand for sugary drinks is much less elastic than their supply. b) Both the demand for, and the supply of, sugary drinks is inelastic. c) Both the demand for, and the supply of, sugary drinks is elastic. d) The demand for sugary drinks is much more elastic than their supply.
Suppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively. Suppose the government imposes a per-unit tax of $45 on the cigarette sellers. By how much would buyers share the tax burden respectively? Show your calculation.
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)
Q3 Consider the following demand and supply equations Q subscript d open parentheses P close parentheses equals 2410 minus 3 P Q subscript S open parentheses P close parentheses equals 100 plus 12 P Suppose that the government imposes a $30 tax on the product Assume that the sellers collect the tax from buyers and submit the tax to the government Calculate the price that sellers receive after the tax is imposed (i.e., the price excluding the per unit tax they submit to the government)
The equilibrium price in a market is $60. A tax is placed on this market that results in buyers paying $65 and sellers only getting to keep $40 of that. Which of the following is definitely true based on this information? Buyers and sellers have the same elasticity. The statutory burden of the tax is on the sellers The size of the tax is $15. Sellers have a more elastic response to this tax. The size of the tax is $20. Buyers have a more elastic response to this tax. If 25 units of this good were sold before the tax was imposed and 20 units were sold after the tax was imposed, how much tax revenue does the government collect? Tax revenue: $ If the purpose of this tax was to correct an externality, what kind of externality might it have been, and what was the per unit size of the externality? positive consumption externality; $15 negative production externality; $20 positive consumption externality; $25 negative consumption externality; $25

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