PS 05 - Economics 335Cornell UniversityJ. Wissink - PROBLEM...

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Economics 335Cornell UniversityJ. Wissink - PROBLEM SET 5 1. Either do the question or answer True, False, or Uncertain. Explain. a. Graphically demonstrate that the economic price incidence of a tax is independent of the statutory incidence of the tax. b. Since a monopolist has market power, he will successfully pass the full/entire economic price incidence of a tax onto the demanders of his product. c. Social security improves economic welfare because the system distributes current earnings of the young (which they would save anyway) to the old; the old are better off and the young are unaffected. 2. Suppose: X D =100-2P and X S =3P. Solve for the market equilibrium. Now suppose the government imposes a tax of $4 per unit and collects half the tax from demanders and half the tax from suppliers. Will the true economic price incidence of the tax be split evenly? Explain. 3. Suppose two commodities, X and Y, have identical completely elastic  supply curves. The equilibrium prices and quantities of the two goods
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PS 05 - Economics 335Cornell UniversityJ. Wissink - PROBLEM...

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