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26. Suppose the pretax price of gasoline is $1 per gallon. A tax of $0.50 is imposed and is
paid by consumers to the government. What must the gross price of gasoline be after the
tax so that the consumer tax burden is equal to the producer tax burden?
27. A tax levied on producers is fully shifted to consumers when: 31. Suppose that the demand for a chemical is given by Q = 100 – 2 P , where quantity is
measured in pounds. The market supply is given by MC = 5. Assume that the marginal
external damage of this product is $3 per unit.
(a) What is the equilibrium price and quantity of this good without government
intervention?
(b) What level of taxation would generate the socially efficient level of the good?
32. The value of an input in its next best use is the:
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D) opportunity cost.
34. Suppose that a city in your state is trying to attract a sports tournament, which
would entail spending a significant amount of money on marketing of the event
and other costs that have no intrinsic value to residents of the city. The city leaders
argue that hosting the sports tournament will increase commerce activity around
the city because of the visitors who will be in town for the tournament.
Consequently, they are lobbying you as the state governor to give them grants,
which they say (credibly) is the only way they can afford to host the tournament.
For your decision, should it matter whether it is a tournament between in-state
teams or national teams? Explain.
36. Suppose your neighbor's dog has been using your lawn in an unwanted way. If the dog's
owner agrees to compensate you for his dog's use of your yard, this is an example of:
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