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In this question, we consider the market for microbeer. Suppose that supply in this market is given by Os = p/3, and the demand by
In this question, we consider the market for microbeer. Suppose that supply in this market is given by Os = p/3, and the demand by 0d = 100 - p. The government wants to introduce a VAT tax, Le. a tax that the consumers will pay on each beer they buy. A. As a first step, calculate the equilibrium price and the quantity consumed in the market with no government intervention. Compute the consumer and the producer surplus, and the total surplus. B. Calculate the equilibrium price and the quantity consumed in the market if the VAT tax is 10 per unit. How much money does the government raise with this proposal? C. How do the consumer and producer surplus (and the total surplus) change? D. Who is suffering the most from the introduction of the tax? Consumers or producers? Why
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