ch15b - Chapter 15: Public Goods and Tax Policy Part Two...

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Chapter 15: Public Goods and Tax Policy Part Two Tuesday, July 27
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QUESTION 1 (equilibrium) Suppose that there is a competitive market with consumer preferences and production costs as defined by the marginal benefit function and marginal cost function below: MB = 200 x/5 MC = 55 + x/20 If no tax is imposed, what is the equilibrium quantity? A) 1020 B) 250 C) 340 D) 500 E) 580
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answer to question 1 Suppose that there is a competitive market with consumer preferences and production costs as defined by the marginal benefit function and marginal cost function below: MB = 200 x/5 MC = 55 + x/20 200 x/5 = 55 + x/20 145 = 4x/20 + x/20 = 5x/20 = x/4 x * = 580 A) 1020 B) 250 C) 340 D) 500 E) 580
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QUESTION 2 (equilibrium with tax) Suppose that there is a competitive market with consumer preferences and production costs as defined by the marginal benefit function and marginal cost function below: MB = 200 x/5 MC = 55 + x/20 If a tax of $20 per unit is imposed, what is the equilibrium quantity? A) 1020 B) 250 C) 340 D) 500 E) 580
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answer to question 2 Suppose that there is a competitive market with consumer preferences and production costs as defined by the marginal benefit function and marginal cost function below: MB = 200 x/5 MC = 55 + x/20 If a tax of $20 per unit is imposed, what is the equilibrium quantity? MB = MC + τ 200 x/5 = 75 + x/20 125 = x/4 x * = 500 A) 1020 B) 250 C) 340 D) 500 E) 580
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QUESTION 3 (government revenue) Suppose that there is a competitive market with consumer preferences and production costs as defined by the marginal benefit
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ch15b - Chapter 15: Public Goods and Tax Policy Part Two...

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