Problem Set 1

# Problem Set 1 - Due Problem Set 1 Economics 231 Fall 2005...

This preview shows pages 1–2. Sign up to view the full content.

Problem Set 1 Due: September 13, 2006 Economics 231 Fall 2005 Professor John Conley Vanderbilt University 1. The government currently places a .25 per package tax on cigarette purchases, and in addition has a .50 per package tax excise tax paid by the firms. The government is going to increase the tax by .40. True, false or uncertain: the tobacco companies would be well advised to lobby the government to place this tax on consumers. Illustrate your answer in a picture where you show the differences between increasing the consumer tax .40 and the producer tax .40. 2. It is often said that you can save money by cutting out the middleman. What role to the middlemen play in the economy? Are they parasites or do they contribute the economic efficiency? Try to discuss this question by making specific reference to the issues that we talked about in class. 3. Suppose that the demand for iPods is given by the following equation: 2000 5 d c q p = where q d is the quantity demanded, and p c is the consumer price. Also suppose that the supply of roller skates is given by 6 100 s p q p = where q s is the quantity supplied, and p p is the producer price. a. Solve for the equilibrium quantity, producer price, consumer price and nominal price. b. Suppose that a \$10 per unit tax is placed on the producer. Solve for the new equilibrium quantity, producer price, consumer price and nominal price c. What would change (if anything) to your answer in part (b) if the tax had been placed on the consumer instead?

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### What students are saying

• As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

Kiran Temple University Fox School of Business ‘17, Course Hero Intern

• I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

Dana University of Pennsylvania ‘17, Course Hero Intern

• The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

Jill Tulane University ‘16, Course Hero Intern