User Account

All Pages

What is equation for the optimal value of th in terms of tp

Assignment Help Macroeconomics
Reference no: EM13907064

Suppose there are two medical goods. Heart surgery and plastic (cosmetic) surgery. The market price for the heart surgery is $100k, the market price for plastic surgery is $10k. The price elasticity of demand for heart surgery is -0.2. The price elasticity of demand for plastic surgery is -3.0. The government is considering a tax on the surgeries. The tax on heart surgery is denoted th, and the tax on plastic surgery is denoted tp.

a) Why did I choose to make the demand elasticity for plastic surgery large relative to heart surgery?

b) What is the equation for the optimal (Ramsey) value of th in terms of tp.

c) In a clearly written paragraph, comment on the relative size of th compared to tp, and why we are seeing this result.

d) Suppose the government has selected tax levels th and tp using the Ramsey rule. Furthermore, at those taxes, the market sells 300 thousand heart surgeries and 1.5 million plastic surgeries. Finally, the government collects $1 billion in revenue from these taxes. What are the values of th and tp?

Reference no: EM13907064

Questions Cloud

Multiplying the current balance : The interest is calculated by multiplying the current balance, rate and time period which is one quarter of a year as in this case. A new balance is calculated by adding that interest.
Each unit requires two hours of direct labor : The direct labor rate is $ 20 per hour. Prepare a direct labor budget for July.
Create a literate environment in your classroom : Write a 500-750-word essay that details how you would create a literate environment in your classroom to support the literacy needs of the students described in your selected grade level. Clearly identify and describe the resources available in yo..
Write general fund and government-wide journal entries : Write General Fund and Government-wide journal entries for the following: Property tax bills of $700,000 were sent to property owner. It is expected that 90% of the taxes will be collected and they will be available for immediate uses.
What is equation for the optimal value of th in terms of tp : Suppose the government has selected tax levels th and tp using the Ramsey rule. Furthermore, at those taxes, the market sells 300 thousand heart surgeries and 1.5 million plastic surgeries. Finally, the government collects $1 billion in revenue fr..
Write journal entries for general fund and government-wide : Write journal entries for general fund and government-wide. The City adopted a General fund budget for the year which included estimated revenues of $700,000, estimated other financing sources of $50,000 and appropriations of $670,000.
What is your reaction to the incidence of female perpetrator : What is your reaction to the incidence of female perpetrators of physical dating violence? Do you feel this is an area in which more attention should be directed? Explain your response
The majority of living biological matter : Which chemical elements make up the majority of living biological matter?
Prepare journal entries for transactions : George Commenced business by opening a bank account for the business and depositing $6000 fo his own money. He also contributed a computer valued at $3000. George bought his wife a gift for their wedding anniversary cost $335 and paid for it using th..

Reviews

Write a Review

Macroeconomics Questions & Answers

  Assume there are two types of investments

Assume there are two types of investments, business investments. There is a permanent increase in the nominal supply of money.

  Show a profit maximizing monopolist equates marginal revenue

(1) Show that a profit maximizing monopolist equates marginal revenue in each market to the common marginal cost. (2) Derive mathematically the formulas for the price-elasticity of demand and for the income-elasticity of demand. Interpret both m..

  What is the minimum price at which firms will continue

Assume that there are a large number of identical firms in a competitive industry, each with the cost function

  Absolute advantage and comparative advantage

Determine absolute advantage and comparative advantage and explain why will resources specialize according to their comparative advantages?

  Scenario of risky shares

Suppose two equally risky shares, Hi and Lo. Hi shares pay a generous dividend and offer low expected capital gains. Lo shares pay low dividends and offer high expected capital gains.

  1 when the price of a box of herbal tea bags rises from 099

1. when the price of a box of herbal tea bags rises from 0.99 to 1.21 the quantity offered for sale rises from 400000

  Illustretae what is relationship among quality- consumption

Illustretae what is the relationship among quality, consumption and demand for health care services.

  Economic threats or opportunities for the us

Determine the economic implications for the United States of the increase of China and India as significant economic powers.

  How trade balance under floating and fixed exchange rates

Supposed that higher income implies higher imports and thus lower net exports. That is the NX = NX (e). what are the effects in a small open economy of fiscal expansion on income and the trade balance under floating and fixed exchange rates

  A consumer of two goods faces positive prices for both

a consumer of two goods faces positive prices for both goods and has positive income. her preferences over consumption

  How does inflation affect peoples standard of living

Describe the market behavior that should result if the price of a product is below its equilibrium price; then describe the behavior that should occur if the price is above its equilibrium price.

  How much does the farmers revenue change

The farmer initially grows 1,057 acres of wheat and 0 acres of corn. Suppose the price of corn increases by $102 per acre harvested and how much does the farmer's revenue change by if she continues to grow wheat even after the price of corn increas..

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