Consider an excise tax on the market for almonds. Moreover, assume the magnitude of the tax...

Consider an excise tax on the market for almonds. Moreover, assume the magnitude of the tax is $3.00 a pound. Assume the tax is levied on the demand side.

a.) Who do you suppose will pay more of the tax? Almond producers or consumers? Why?

b.) Draw a graph showing prices and quantities before and after the tax. Moreover label regions of the graph A, B, C, D, etc and show CS, PS, TS, DWL and TR before and after the tax. Draw your graph consistent with your answer to part (a).

c.) If P = $20 provide plausible P B and P S

d.) Suppose Q = 15; 000 and QT = 12; 000 Calculate DW L and T R.

e.) Suppose the supply was more inelastic than we thought for parts (a) - (d). Provide a new QT and recalculate DW L and T R.

f.) How would things be different if we were to collect the tax on the supply side?

g.) Consider the question, "Is this tax a good idea or not?". Is this a question of normative economics or positive economics.

Expert Solution

Rahul Sunny answered 2 years ago

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