Question
Hi! the question below has multiple steps, I have the answers for question 1 and 2 (please see below), but would really appreciate some help
Hi! the question below has multiple steps, I have the answers for question 1 and 2 (please see below), but would really appreciate some help with the following ones. Thank you so much!
1 - The City of Cambridge is concerned about the number of wild MIT students who will be partying on Halloween and wants to limit the number of parties in order to curb the costs of policing underage drinking and noise violations. The city has asked you to evaluate the welfare implications of policies they are considering. Think of price here as the amount of money party hosts will collect at the door from party-goers. The demand for parties is given by=3002 . The supply of parties is given by=
Find the equilibrium price and quantity in the market for Halloween parties.
Answer:
= 100
= 100
2 - Now suppose that the city has found a fail-safe way to tax parties by requiring each party host to pay a fee of $60. Find the new price for party-goers, the after tax price received by the party hosts, and the new equilibrium quantity.
Let^be the price the suppliers receive (after the tax),^be the price the consumers pay for each party, and^ be the after tax quantity.
Answer:
^= 60
^c= 120
q^t= 60
QUESTIONS THAT NEED ANSWERING:
3 - For the tax in question 2 , calculate the following.
The deadweight loss of the tax (in positive figure):
The consumer surplus post-tax:
Producer surplus post-tax:
Tax revenue:
What happens to the total surplus?
a - Total surplus decreases
b - Total surplus stays the same
c - Total surplus increases
What happens to consumer surplus?
a - Consumer surplus stays the same
b - Consumer surplus increases
c - Consumer surplus decreases
What happens to producer surplus?
a - Producer surplus decreases
b - Producer surplus increases
c - Producer surplus stays the same
4 - Suppose instead of a tax, the city requires all parties to obtain a license, and only 50 licenses will be made available for October 31. Assume they can perfectly enforce this policy, and there is no way for a party to happen without a license. What is the new price and quantity?
Let^ be the quantity after licenses are required and^ be the price after licenses are required.
^=
^=
5 - For the quantity restriction in Q4, calculate the following. (Assume that the licenses go to the 50 party hosts with the marginal willingness to supply at the lowest prices.)
The deadweight loss of the tax (in positive figure):
The consumer surplus post-tax:
Producer surplus post-tax:
What happens to total surplus (relative to no-policy, no-tax)?
a - Total surplus decreases
b - Total surplus stays the same
c - Total surplus increases
What happens to consumer surplus?
a - Consumer surplus stays the same
b - Consumer surplus increases
c - Consumer surplus decreases
What happens to producer surplus?
a - Producer surplus stays the same
b - Producer surplus increases
c - Producer surplus decreases
Thank you so much!
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