Reference no: EM1369854
There are two Markets.
Both Market A (Athletes) and Market B (Boats) have the same demand curve of Qd = 400 - 20 Pd where Pd is the price consumers pay and Qd is the quantity demanded.
Market A has a supply curve of Qsa = 100 + 10Psa where Ps is the price received by suppliers and Qs is the quantity supplied.
Market B has a supply curve of Qsb = -200 + 40Psb where Ps is the price received by suppliers and Qs is the quantity supplied.
Both markets have an equilibrium price of 10 and quantity of 200. Therefore both markets are of the same size.
Question: If you palce the same tax on both markets, do you expect more government revenue in Market A, Market B, or the same amount and why?
Is this correct: You will have the same amount of government revenue since the equilibrium and quantity and demand curve is the same for both markets.
Questioin: If you palce the same tax on both markets, do you expect more Dead Weight Loss in Market A, Market B, or the same amount and why?
Question: Based on efficiency, which market should we tax and why?
Question: Based on equity, which market should we tas and why?
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