Criteria:

For each of the following scenarios, calculate the market price with the specified tax. When the market is perfect competition, it is assumed that all firms in that market are subject to the tax.

All excise taxes are levied on the producers.

All of the analyses are for the short-run, with no industry entry or exit.

Type of Market = Perfect competition

Current $= $180

Qty = 10K

Type of Tax = Tax on economic profits

Amount of tax = 4% on economic Profit

Price elasticity of D = -.5

Price elasticity of S = 2.6

I am getting confused with calculating the new price with tax in place. I want to simply take 180*1.04= 187.20 but I am not convinced this is correct. Please advise