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Unformatted text preview: receipts are $15 million. The deadweight loss is $1.5 million. The deadweight loss measures the difference between potential net benefits ($54 million) and the net benefits that are actually achieved ($25 + $12.5 + $15 = $52.5 million). 10.5 Using the supply and demand curves from Example 10.1 and an excise tax of $0.40 implies 165 50( 0.40) 66 55 0.75 s s s P P P+ = + = Substituting into the equation for d P implies 1.15 d P = . Substituting s P into the supply equation implies 66 55(0.75) 107.40 Q = + = . Finally, the government tax receipts will be 0.40(107.40) 42.95 tQ = = . These values correspond with those in Table 10.1. Graphically, the solution is 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 50 100 150 200 250 Quantity Price Supply Supply + 0.40 Demand...
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This note was uploaded on 02/29/2012 for the course 220 320 taught by Professor Raven during the Summer '10 term at Rutgers.
 Summer '10
 Raven

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