Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

1c. (7 points) Let's say the policy will be funded through a $3 tax on sales of 12-packs of beer. The competitive market for 12-packs

image text in transcribed
1c. (7 points) Let's say the policy will be funded through a $3 tax on sales of 12-packs of beer. The competitive market for 12-packs of beer is given by a demand curve: Q= 2300-100P and a supply curve of Q= 200P -1000. What is the pre-tax equilibrium? What are CS, PS and TS in the market for beer? Now let sellers pay a $3 Tax for each 12-pack sold. That is, the cost of supplying a unit of beer rises by $3 for each Q, since the tax is a new cost of doing business. What is the new Q of beer purchased with the tax? What is the new price you see in the store? How much of that price is kept by the seller? How much government revenue (GR) is raised? Is it enough to pay for the apple a day program? Graphically, show the new CS, PS, GR, and deadweight loss (DWL). How large in dollars is the DWL? Is that a cost or benefit of the program? Therefore, what are the net benefits of the tax? What are the total net benefits to society of this program? Would you recommend it be undertaken-why or why not

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Latin America's Economy Diversity, Trends, And Conflicts

Authors: Eliana Cardoso, Ann Helwege

1st Edition

0262531259, 9780262531252

More Books

Students also viewed these Economics questions

Question

How have psychologists and others confounded sex and gender?

Answered: 1 week ago