Unformatted text preview: (c) How much of the tax is borne by the sellers? (d) How much of the tax is borne by the buyers? (e) Senator Duncan, from a state with several yo-yo factories, has proposed legislation that would change the yo-yo tax by switching it from the seller to the buyer, under the rationale that yo-yo makers are losing money and cannot afford to pay the tax. If the bill passes, what will be the new equilibrium price and quantity? (g) How much of the $1.00 tax is borne by the seller under Duncan’s bill? (h) How much of the $1.00 tax is borne by the buyer under Duncan’s bill? 3. In lecture, we focused on the effects of a tax on a good. Now consider a subsidy. In particular, suppose the government pays $2 to the buyers of a good for each unit of the good they purchase. How does the subsidy affect consumer surplus, producer surplus, tax revenue, and total surplus? Did this subsidy lead to a deadweight loss?...
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- Fall '08
- Supply And Demand, new equilibrium price, Japanese cars, quantity restriction