An industry's inverse demand was P^D = 20 - 0.1Q and its inverse supply was P^S...

An industry's inverse demand was P^D = 20 - 0.1Q and its inverse supply was P^S = 4 + 0.1Q.

Calculate the consumer surplus, producer surplus, government revenue and deadweight loss for taxes of $4, $8, $12 and $16 per unit sold.
Graph government revenue and deadweight loss as functions of these tax rates.
What tax maximizes government revenue?

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Rahul Sunny answered 6 months ago

An industry's inverse demand was PD = 20 - 0.1Q and its inverse supply was PS...

An industry's inverse demand was PD = 20 - 0.1Q and its inverse supply was PS = 4 + 0.1Q. a. Calculate the consumer surplus, producer surplus, government revenue and deadweight loss for taxes of $4, $8, $12 and $16 per unit sold. b. Graph government revenue and deadweight loss as functions of these tax rates. c. What tax maximizes government revenue?

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