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Q5. Microeconomic Policy Exercise (20 Marks) If a student is prepared to pay $25/hour to hire a tutor and a tutor is prepared to tutor
Q5. Microeconomic Policy Exercise (20 Marks) If a student is prepared to pay $25/hour to hire a tutor and a tutor is prepared to tutor for $20/hour. a) What is the amount of economic welfare created by the student buying tutoring services from the tutor? For each of the government policies given below explain ( i) whether trade between the student and tutor will continue to take place and (ii) the amount of deadweight loss (if any) created by policy. a) A $6/hour tax on the tutor. A $4/hour tax on the tutor. b) A $6/hour tax on the student. A $4/hour tax on the student c) A $19/hour price ceiling. d) A $26/hour price oor. e) A $6 subsidy for the tutor. A $6 subsidy for the student
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