The local community is considering two options to raise money to finance a new football stadium....

QD=80,000 -1000P

QS=19,000P - 220,000

Round to the nearest whole number; no decimals, commas, or dollar signs.

a) Calculate consumer and producer surplus with the per unit tax.

The second option the community is considering implementing is an income tax. If an income tax is implemented, the new demand for restaurant meals is:

Q'D=79,000-1000P

b) Calculate the level of consumer and producer surplus in the restaurant market with the income tax. Which of the two options will reduce the sum of consumer and producer surplus the least? (specificor income)

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Expert Solution

Rahul Sunny answered 1 year ago

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