In: Economics
For a perfectly competitive market, daily demand for a good is given by P = 10 - Q, where P is price and Q is quantity. Supply is given by P = 2 + Q. Suppose the government imposes an excise tax of $2 on sellers in the market. (An excise tax is a tax per unit.)
(a) What is the tax revenue from the government and (b) what is the dead weight loss due to the tax policy?