2. Tax Incidence: Prices vs. Quantities Let's review some incidence concepts and calculations. The market demand for oboes is Q = 2,600 - 20P, and the government intends to place a $4 per unit tax on oboe producers.

a)Suppose the supply of oboes is Q = 400. What is the equilibrium price before the tax? What is the equilibrium price after the tax?

b)How much of the tax is borne by producers? How much is borne by consumers?

c)What is the deadweight loss from this tax?

d)Now suppose the supply of oboes is Q = 12P. What is the equilibrium price and quantity before the tax? What is the equilibrium price and quantity after the tax? (Hint: remember that because suppliers are remitting the tax, the price that's relevant for them is the market price minus the amount of the tax.)

e)How much of the tax is borne by producers? How much is borne by consumers?

f)What is the deadweight loss from this tax?

g)Explain why the deadweight loss calculations differ between (c) and (f).