Question
The demand and supply curves for soft drinks are given by QD = 20-2P and QS = 2P, respectively. (40 points, 8 points each)
The demand and supply curves for soft drinks are given by QD = 20-2P and QS = 2P, respectively. (40 points, 8 points each) (1) Solve for the equilibrium price and quantity. Suppose now the government imposes a per-unit tax of $4 on the sellers. (2) Solve for the new equilibrium price and quantity. (3) Calculate the deadweight loss. Suppose now the government imposes a proportionate take-away tax t = 50%. (Tips: T = 50% take-away tax is equivalent to t = 100% add-on tax) (4) Solve for the new equilibrium prices and quantity. (5) Calculate the deadweight loss.
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Microeconomics
Authors: Douglas Bernheim, Michael Whinston
2nd edition
73375853, 978-0073375854
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