Calculate the change in consumer surplus due to sales tax

Assignment Help Business Economics
Reference no: EM13987017

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.

Reference no: EM13987017

Questions Cloud

Values based on family-health-achievements and wealth : In 900 words or more needs to be general in nature and should reflect your beliefs, and not necessarily a statement of fact. Are your values based on family, health, achievements, wealth, job success, happiness, faith, love, or anything else that you..
Problem regarding the standard deviation of return : Bob and Ann both make optimal portfolio allocations. Bob has $ 1000 to invest, Ann has $ 2000 to invest. There are 3 assets that they can invest in: a risk free asset with a rate of return of 5%, and two risky assets with the following properties:
The magnitude of deadweight loss from the price ceiling : Calculate the magnitude of deadweight loss from the price ceiling. Find a price floor that will result in the same magnitude of deadweight loss.
Assessment of risk for fabrication of helicopter spar : Reston Aviation has been awarded a government contract that requires the fabrication of an unusually large helicopter blade spar. Barbara Matthews, Reston’s President, is faced with two alternatives: Assessment of Risk for Fabrication of Helicopter S..
Calculate the change in consumer surplus due to sales tax : Suppose the market for cigarettes is characterized by the following information: 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 cha..
Decisions for the future based on today information : Who is a manager and how do managers make decisions for the future based on today's information?
Problem regarding the west nile virus : You are the director of communicable diseases in a city health department, responsible for a large urban community. It is early spring in 2003. For the past two years, your department has been working to control the spread of the West Nile Virus a..
Describe how you could perform a review of current research : Describe how you could perform a review of current research on the subject/issue. Identify which UMUC Library/database sources could be useful in your research review. What criteria will you use in the selection of review sources from the web?
Create a bibliography of sources for your portfolio project : You should have at least five sources, including a scholarly journal article, to support your paper. You should fully cite all the sources and images in your draft bibliography

Reviews

Write a Review

Business Economics Questions & Answers

  Assume increase in government spending

Assume increase in government spending. Would the effect on AD be larger if the Fed held MS constant in response or if the Fed were committed to maintaining a fixed interest rate?

  Apc before the increase in disposable income

Illustrate what is the economy's MPC? It's MPS. Illustrate what was the APC before the increase in disposable income.

  Qpart 1in 2011 company xyz had sales of 345620million net

q.part 1in 2011 company xyz had sales of 345620million net working profit subsequent to taxes of 10250 million and

  Most android phones struggle to be profitable

How is Apple able to maintain high profit margins on its phones, while most Android phones struggle to be profitable? Select the answers that apply and give justification for your choices.

  Deadweight loss does great reception causes

How much deadweight loss does Great Reception causes when it restricts output and charges a price above marginal cost.

  The price elasticity of demand

If the price elasticity of demand in the United States for American-made luxury cars is 1.9, what is the impact on revenue if the price increases by 10%?

  Qassume an industry is composed of the following eight

q.assume an industry is composed of the following eight firms.company market sharefirm a 30 percent firm b 25 percent

  Product is becoming more popular among buyers

Refer to the above graphs. Which graph depicts a situation where sellers are increasing their output because their product is becoming more popular among buyers?

  The classical dichotomy and the neutrality of money

The classical dichotomy and the neutrality of money. Which of the following give the nominal value of a variable? Check all that apply. Which of the following give the real value of a variable?

  How would you value goodwill that is obtained in this way

Sometimes, a bidder on a work contract may bid lower than what would maximize his/her profit from the contract and the reason for that is to create goodwill. How would you value the goodwill that is obtained in this way?

  Q1 given the choice between a1000 p 10 and b1200 p090

q1. given the choice between a1000 p 1.0 and b1200 p0.90 kathy prefers gamble a. does this mean she is risk averse?

  Cross-price elasticity of demand between product

You are the manager of a firm that receives revenues of $60,000 per year from product X and $90,000 per year from product Y. The own price elasticity of demand for product X is -1, and the cross-price elasticity of demand between product Y and X is 1..

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!

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