Reference no: EM13740916
In a perfectly competitive market for coal, consumers’ benefit function from consuming coal Q, is given by:
B(Q) = -0.25Q^2 + 240Q
In addition, the coal producer has a cost function given by:
C(Q) = 0.1Q^2 + 2Q
Suppose the government imposes an ad valorem tax on coal producers of 7% of the sale price.
What is the competitive equilibrium in the absence of the tax?
What is the competitive equilibrium with the ad valorem tax?
What is the change in consumer surplus as a result of the tax?
What is the change in producer surplus as a result of the tax?
How much revenue is generated by the tax?
What is the deadweight loss from the tax?
What is the change in total welfare due to the tax?
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