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The vertical distance between points A and C represent the amount of the tax. The amount of tax revenue received by the government is $4000 $6000 $10000 $24000

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The vertical distance between points A and C represent the amount of the tax. The amount of tax revenue received by the government is

		$4000
		$6000
		$10000
		$24000

1000
Price
Supply
900
A
800
700
600
500
400
300
200
100
Demand
++
10 20 30 40 50 60 70 80 90 100110 Quantity
+

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(a) The supply and demand equations for a good are p-2q = 1 and p+ 2q = 9, respectively. Find the equilibrium price and quantity. A percentage [of the price] tax of 100r% is imposed. Find the new equilibrium price and quantity. What fraction of the tax paid has been passed onto the consumer? (b) If an asset is purchased at some initial time t = 0 for $200 and sold at some time t > 0 in the future, the value of the sale is given by P(t) = (2t² + 14t+200)e-¹/10, dollars. Find the stationary points of P(t) and determine their nature. Should the asset be purchased and, if so, when is the best time to sell it? [Hint: The fact that e> 2.7 may be useful.]
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