Question

4. The congress and the governor decide that they should reduce environmental pollution reducing the use of gasoline. They impose a tax of $ 0.10 on each liter of gasoline sold.

a. Should they impose the tax on producers or consumers? Explain

carefully using supply and demand diagrams. (4 points)

b. If the demand were more elastic, would the tax be more or less effective?

your purpose of reducing gasoline consumption? Explain using both text

and diagram. (4 points)

c. Are consumers helped or harmed by this tax? Why?

(4 points)

d. Are employees of the oil industry helped or harmed by this

tax? Why? (4 points)

5. A subsidy is the opposite of a tax with a tax of $ 0.50 to the buyers of cups of coffee, the government collects $ 0.50 for each cup of coffee purchased; with a subsidy $ 0.50 to coffee sellers, the government pays sellers $ 0.50 to sellers for every cup of coffee sold.

Show the effect of a subsidy of $ 0.50 per cup on the cup offer curve of coffee, the effective price paid by consumers, the price received by the vendors and the amounts of cups sold. (4 points)

b. Do consumers benefit or lose by this policy? The producers do they benefit or lose? Does the government benefit or lose? (3 points)

6. Consider how medical insurance affects the quality of medical services. Suppose the typical medical procedure costs $ 100, but the person with medical insurance, he pays only $ 20 out of pocket. Your insurance pays the remaining $ 80. (The Medical insurance company recovers $ 80 for premiums, but premiums paid by a person does not depend on the procedures that are done.)

Draw a market demand curve for medical procedures. (In its diagram, the horizontal axis must represent the number of procedures doctors.) Show the claimed amount of medical procedures if each procedure has a price of $ 100. (4 points)

In your diagram, show the quantity demanded of procedures if the Consumers only pay $ 20 per procedure. If the cost of each procedure is really $ 100, will this amount maximize the total benefit? Explain (3 points)

Economists often blame insurance for excessive use of care doctor. Given your analysis, could this use be excessive? (2 points) d. What policies could prevent this excessive use? (2 points)

Answer 1

You need to post the other two questions separately.