Reference no: EM132488588

1. The market demand curve is XD = 1000 - 2(p + t) and the market supply curve is XS = 0.5p, where t is a per-unit tax.

a. Find the inverse demand curve and the inverse supply curve.

b. For t = 0, what is the equilibrium price p* and equilibrium quantity X*?

c. For t = 0, what is consumer surplus CS, producer surplus PS?

d. For t = 50, what is the equilibrium price p' and the equilibrium quantity X'?

e. For t = 50, what is consumer surplus CS', and producer surplus PS'?

f. What is tax revenue TR' and the deadweight loss DWL?

g. By comparing consumer and producer surplus before and after this tax, which group pays the largest share of taxes? Why?

h. What is the tax rate t that maximizes tax revenues?