Equation Solution - First, find initial equilibrium P and...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
First, find initial equilibrium P and Q: 100 – P = 3P P* = 25 Q* = 75 Stax S Pc Pf D Qtax Need to find Pc and Pf. -for Pc, solve Qd = Qs with tax 100 – P = 3P – 8 P = 27 is what consumers now pay Q = 73 -for Ps, substitute Q = 73 into initial Qs 73 = 3P P = 24.33 is what firms receive The amount of the tax is $27 – 24.33 = 2.67 The consumers now pay $2 more. The suppliers now receive $.67 less. The government’s tax revenue is $2.67*73 = $194.91 The deadweight loss is the area of the shaded triangle: DWL = .5*2*2.67 = $2.67
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
J&H Industries produces breadboards for restaurants. The only variable input is labour. Costs and the selling price of the good, P, are given in dollars. Fill in the rest of the table. L Q MP TFC TVC TC MC AFC AVC ATC P 1 20 5 60 65 .25 3 3.25 15 2 40 20 5 120 125 3 .125 3 3.125 15 3 50 10 5 180 185 6 .1 3.6 3.7 15 4 58 8 5 240 245 7.5 .086 4.14 4.23 15 5 62 4 5 300 305 15 .08 4.84 4.92 15 6 64 2 5 360 365 30 .078 5.63 5.71 15 Sketch the typical short run cost curves. Label the following on the diagram:
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/18/2010 for the course ECONOMICS 1b03 taught by Professor Holmes during the Spring '10 term at McMaster University.

Page1 / 4

Equation Solution - First, find initial equilibrium P and...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online