The market demand function for corn is Qª = 15 - 2P and the market supply function is Q = 5P -2.5, both measured in billions of bushels per year. Suppose that there is a tax of $T per bushel. What are the prices buyers and sellers receive as a function of the tax T? What are the government’s revenue, aggregate surplus, and the deadweight loss as a function of T? What happens to the ratio of the deadweight loss divided by the government's tax revenue as T grows? 15.3 %3D %3D

ENGR.ECONOMIC ANALYSIS
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ISBN:9780190931919
Author:NEWNAN
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Chapter1: Making Economics Decisions
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The market demand function for corn is Qª = 15 - 2P and the market supply function is
Q = 5P -2.5, both measured in billions of bushels per year. Suppose that there is a tax of
$T per bushel. What are the prices buyers and sellers receive as a function of the tax T?
What are the government’s revenue, aggregate surplus, and the deadweight loss as a
function of T? What happens to the ratio of the deadweight loss divided by the
government's tax revenue as T grows?
15.3
%3D
%3D
Transcribed Image Text:The market demand function for corn is Qª = 15 - 2P and the market supply function is Q = 5P -2.5, both measured in billions of bushels per year. Suppose that there is a tax of $T per bushel. What are the prices buyers and sellers receive as a function of the tax T? What are the government’s revenue, aggregate surplus, and the deadweight loss as a function of T? What happens to the ratio of the deadweight loss divided by the government's tax revenue as T grows? 15.3 %3D %3D
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