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Unformatted text preview: ∆Welfare = –B – C Q 1 Q Quantity Price P P max D S A B B C ∆CS = A – B where A > B ∆PS = – A – C ∆Welfare = –B – C Q 1 Q Quantity Price P b P P s S D A D t B C Q 1 Q 0 Quantity P b = price paid by buyers P s = price received by sellers t = tax Buyers loss = A + B Sellers loss = C + D Government gain = A + D (tax revenue) Deadweight loss = B + C 2 Q4 a. Q = 7 and P = $3. b. Q = 6.5, Pb = $3.5, and Ps = $2.5. c. Q = 7.5, Pb = $2.5, Ps = $3.5, and government cost = $7,500. Q5 Pg = $4 and Q = 25. DW loss = $12.6 billion....
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This note was uploaded on 01/22/2012 for the course COMM 220 taught by Professor J.garon during the Spring '08 term at Concordia Canada.
- Spring '08