User Account

All Pages

Consumer surplus and producer surplus in pre-tax equilibrium

Assignment Help Business Economics
Reference no: EM13987088

Suppose the market for cigarettes is characterized by the following information:

Qd = 70 – 5P [Demand] Qs = 3P – 10 [Supply]

[Note: P = price per unit; Qd = thousands of units demanded; Qs = thousands of units supplied]

Suppose the government imposes a sales tax of $2 per unit. Answer questions (i) through (v) below:

i) Calculate the magnitude of the consumer surplus and producer surplus in the pre-tax equilibrium.

ii) Calculate the tax revenue in the post-tax equilibrium.

iii) Calculate the change in consumer surplus due to the sales tax.

iv) Calculate the change in producer surplus due to the sales tax.

v) Calculate the Dead-Weight-Loss due to the sales tax.

B. Suppose the government imposes a price ceiling of $50 on a market characterized by the following information:

Qd = 700 - 2P Qs = 100 + 4P

[Note: P = price per unit; Qd = hundreds of units demanded; Qs = hundreds of units supplied]

 

Calculate the magnitude of deadweight loss from the price ceiling. Find a price floor that will result in the same magnitude of deadweight loss.

Reference no: EM13987088

Questions Cloud

What is the initial demand for loanable funds-investment : Money Demand =8750-500i Loanable Funds Demand = 2000 –100i Initial Reserves: $500 Y1=15600 Y2=14000 Reserve Ratio: 8% MPC=0.8 Tax Revenue: $1100 Govt Purchases: $1000 Suppose the Government is implementing fiscal policy. What is the new level of Gove..
How far will the combined bullet and block move : A bullet of mass 20.0g is fired at an intital velocity of 200m/s into a 15.0 kg block that is intitally at rest. The combined bullet and block move over a rough surface of coeffcient at kinetic friction of 0.500. How far will the combined bullet ..
Calculate the magnitude and direction of the couloumb force : Calculate the magnitude and direction of the couloumb force on the 6.00 μC charge due to 1.50 μC and - 2.00 μC charges. μC stands for microcouloumb.
The greatest impact on the exchange rate : What is the probable effect of each of the following on the exchange rate of a country, other things being equal? More domestic oil is discovered and developed. Which two of these do you think would have the greatest impact on the exchange rate?
Consumer surplus and producer surplus in pre-tax equilibrium : Calculate the magnitude of the consumer surplus and producer surplus in the pre-tax equilibrium. Calculate the tax revenue in the post-tax equilibrium. Calculate the change in consumer surplus due to the sales tax. Calculate the magnitude of deadweig..
What are some of the symptoms of panic disorder : Provide the following details about the disorder: What are some of the symptoms? What would this disorder look like in person? Make sure you relate this back to the DSM criteria
Assume that the economy is currently at potential real gdp : Assume that the economy is currently at potential real GDP. Which of the following would put the economy in an inflationary gap? A) temporary increase in wages B) greater stock market wealth C) higher business taxes D) higher marginal taxes
Based on your calculations rank the projects and support : Using a 4.5% discount rate, calculate the Net Present Value, Payback, Profitability Index, and IRR for each of the investment projects below (note, the inflows are for each year).
Government control of price-output-entry of new firms : Government control of price, output, entry of new firms, and quality of service in industries where monopoly appears desirable are known as

Reviews

Write a Review

Business Economics Questions & Answers

  Underlying information for the call option

What is the value of the six month put option on the stock given the same underlying information for the call option. Verify that put/call parity holds for properly priced call and out options

  The economic growth also economic developments

Explains vicious cycle of poverty. Explain the difference between the economic growth also economic developments.

  What is the no-trade relative price of cars at home

Suppose that each worker in the Home country can produce three cars or two TVs. Assume that Home has four workers. Graph the production possibilities frontier for the Home country. What is the no-trade relative price of cars at Home?

  If the product is merely a contemporaneous occurrence

Hebron and Stack discuss the fragmentation of nations - the rise of smaller units within a nation. While this is certainly happening at the same time as increasing market integration and globalization, is this a product of globalization or is mere..

  Each option over the life of the mortgage

To purchase a house for $80,000, a new couple has $12,000 available for down payment. get a new standard mortgage with 10% APR interest compounded monthly for a 30-year term. What is the effective rate for option 2 per year? Compute the monthly payme..

  Long-run impact of increase in budget defcit

Consider a case of small open economy. In this economy, there is an IT revolution, and as a result the productivity of the economy has gone up. What will be the e§ect of this productivity increase on interest rate and net export in this economy? What..

  What is the constraint and what are optimality conditions

Elle's preferences over apples (A) and bananas (B) are represented by the Cobb-Douglas utility function; u(A; B) = AB. Write down the optimization problem. What is the objective function? What are the choice variables? What is the constraint?  What a..

  Some ways we can avoid hindering leadership

Let's try to define the attributes of a good follower. What does it take to be a good follower? How can we support the leader in our team? What are some ways we can avoid hindering leadership?

  What happened to the sales tax base

The state government collected all taxes due, but its tax revenues were equal to $40 million each year. What happened to the sales tax base between 2006 and 2007? What could account for this result?

  Mostly likely cause the demand for miller beer

That of the following would mostly likely cause the Demand for miller beer to reduce.

  What is the deadweight loss of the payroll tax

Describe the impact of a payroll tax on wages and employment in a competitive industry. Why is part of the tax shifted to workers? What is the deadweight loss of the payroll tax?

  Second best pricing

Assume the MTA’s production cost curve is given by C=1,200,000,000 + 3.5q where q denotes the number of subway trips. From past fare changes we know that a 20% drop in fares will increase the number of transit trips by 4%. Calculate the first-best tr..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd