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Unformatted text preview: 3550 Quiz 9 F10 Last Name: ___ First Name: Analyze the effect on social welfare of a sales tax Ex) Demand and supply for beer (per sixpack) in Denton can be illustrated by the following equations: (Inverse) Demand: (Inverse) Supply: P = 20 1 Q [or Q = 25P + 500, if you prefer] 25 1 P = 5 + Q [or Q = 50P 250, if you prefer] 50 a. Calculate total surplus (=consumer surplus and producer surplus). b. Now let us assume that the government imposes a $3 excise tax on each producer. Calculate total surplus (=consumer surplus + producer surplus + government tax revenue) c. Measure the deadweight loss Analyze the effect on social welfare of a subsidy. d. Now let us assume that the government provides a $3 subsidy to each producer. Calculate total surplus (=consumer surplus + producer surplus government subsidy expenditure) e. Measure the deadweight loss ...
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This note was uploaded on 03/14/2012 for the course ECON 2243 taught by Professor Henryfors during the Spring '12 term at Abant İzzet Baysal University.
- Spring '12