Homework 5, Macroeconomics


Instructions


For the following 10 questions, consider an economy which is initially in equilibrium without a tax, with P* of $90 and Q* of 10. Later, a tax is put on the market that changes the quantity to 5, the price paid by buyers to $120 and the price received by sellers to $70. The supply and demand curves are smooth, straight lines, with the vertical intercept for the demand curve at 150 and the vertical intercept for the supply curve at 50.

1. What is consumer surplus before the tax?

2. What is producer surplus before the tax?

3. What is the amount of the tax (per unit)?

4. What is consumer surplus after the tax?

5. What is producer surplus after the tax?

6. What is the tax incidence for buyers (per unit)? Write your answer in absolute value (regardless if it is an increase or a decrease).

7. What is the tax incidence for sellers (per unit)? Write your answer in absolute value (regardless if it is an increase or a decrease).

8. What is the amount of tax revenue?

9. What is the amount of deadweight loss?

10. Which side of the market is more elastic, from your findings, and what does this imply about the slope of the curve?

A. Demand is more elastic than supply and the demand curve is flatter than the supply curve.
B. Demand is more elastic than supply and the demand curve is steeper than the supply curve.
C. Supply is more elastic than demand and the supply curve is flatter than the demand curve.
D. Supply is more elastic than demand and the supply curve is steeper than the demand curve.
Posted Date: 7/9/2012 12:07:53 AM | Location : United States







Related Discussions:- Homework 5, Assignment Help, Ask Question on Homework 5, Get Answer, Expert's Help, Homework 5 Discussions

Write discussion on Homework 5
Your posts are moderated
Related Questions
Explain about the diminishing returns to an input. There are diminishing returns to an input while an increase within the quantity of which input, holding the levels of each of

Limitations of the theory of rational expectations: Critics of this theory note that if policy makers have more information about the economy or their own actions than d

constructing a opportunity set and budget line for $15 lottery ticket and intending on buying a candy bar for $0.75 and peanut bag for $1.50

Suppose that Lilistan has two types of citizens: low-income citizens (income = $20,000) and high-income citizens (income = $80,000). Interest income is currently taxed and each typ


Figure below demonstrates a more developed version of the circular flow. In this figure we see how goods flow through various sectors of the economy. Figure Money in the c

State the both -Cyclical and Classical unemployment Cyclical unemployment Unemployment because of a recession. Classical unemployment Unemployment because of

The economy of Macroland has a balanced budget with fixed government expenditures G = 150 and T = 150. Investment is autonomous: I = 200. The consumption function is the foll

The Red Lobster sells fresh seafood. Red Lobster receives daily shipments of farm-raised fish from a nearby supplier. Each fish cost $2.50 and is sold for $4.00. To maintain its re

The weights of a sample of five boxes being sent by FedEx are: 48, 24, 28, 12, and 40. (a) Compute the range. (b) Compute the mean deviation. (c) Compute the standard devi