PS4ans_E1_Sp03

# PS4ans_E1_Sp03 - PS 4 Outlines of Suggested Answers Bruce...

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Unformatted text preview: PS # 4 Outlines of Suggested Answers Bruce Brown, Econ. 1 (Micro-Principles) SMC 1. True or False? i. F; ii. T; iii. F; iv. T; v. T; vi. F; vii. F; viii. T; 2) The below graph shows the market for good X, initially with equilibrium quantity, Q X * = 20 and equilibrium price, P * = 10. Show the effect of an excise tax of 6 \$/unit legally collected from the sellers a) \$8 per unit; b) \$14 per unit; c) Tax revenue = (tax per unit) · Q(after tax) = (6)(16) = \$96 For d and e give per unit tax incidence instead of totals requested: ( the total amount of money collected from sellers would be: \$32; and from buyers: \$64) d) Economic incidence on suppliers = \$2 per unit. e) Economic incidence on demanders = \$4 per unit f) The price elasticity of demand (as price changes from \$10 to \$14) = (4/18) ÷ (4/12) = .22/.33 = 67 g) The price elasticity of supply (as price changes from \$10 to \$8) = (4/18) ÷ (2/9) = .22/.22 = 1 [because supply is more elastic than demand, economic incidence on suppliers will be smaller than...
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## This note was uploaded on 03/22/2012 for the course ECON 1 taught by Professor Abdel-rahman during the Spring '08 term at Santa Monica.

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PS4ans_E1_Sp03 - PS 4 Outlines of Suggested Answers Bruce...

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