1. Suppose we have the following supply and demand curves. QD = 500 − 2PD QS...

1. Suppose we have the following supply and demand curves. QD = 500 − 2PD QS = 100 + 2PS

a) Determine the competitive equilibrium for this market.

b) Suppose that we impose a per unit tax of $50 on this market. Determine the following: 1. The price that sellers receive. 2. The price that consumers pay. 3. The number of units sold given the tax.

c) What is the share of the burden borne by consumers? What is the portion of the tax borne by sellers? Think the incidence formula.

d} Determine if the following statement is either True or False: The value of dead weight loss is equal to one-half the amount of tax revenue that is collected.

Expert Solution

Rahul Sunny answered 2 years ago

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