Suppose the demand for pickles on The Citadel is Qd=500-4P, and the supply is Qs=6P. Assume this market is perfectly competitive. Suppose the Council puts a tax of $5 per unit on the purchase of pickles. How much tax revenue is generated by this tax? How much deadweight loss does the tax cause?

Suppose the demand for pickles on The Citadel is Qd=500-4P, and the supply is Qs=6P. Assume this market is perfectly competitive. Suppose the Council puts a tax of $5 per unit on the purchase of pickles. How much tax revenue is generated by this tax? How much deadweight loss does the tax cause?

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter6: Elasticities

Section: Chapter Questions

Problem 20P

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Question

Suppose the demand for pickles on The Citadel is Qd=500-4P, and the supply is Qs=6P. Assume this market is perfectly competitive.

Suppose the Council puts a tax of $5 per unit on the purchase of pickles.

How much tax revenue is generated by this tax? How much deadweight loss does the tax cause?

Definition Definition Cost to society created by market inefficiency when supply and demand are not in market equilibrium.

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