Question

Suppose that the demand curve for wheat is Q=140 - 10p and the supply curve is Q = 10p. The government imposes a specific tax of = 1 per unit. a. How do the equilibrium price and quantity change? (Round quantities to the nearest integer and round prices to the nearest penny) The equilibrium quantity without the specific tax is 70 and the price without the specific tax is $ 7. The equilibrium quantity with the specific tax is 65 and the price with the specific tax that consumers pay is $ 7.5. b. What effect does this tax have on consumer surplus, producer surplus, government revenue, welfare, and deadweight loss? Government revenue (T) is $ 65.00 (round your answer to the nearest penny) The deadweight loss (DWL) is $ (round your answer to the nearest ponny).

Answer 1

witho ut Specitic tex LEquslibauym) DD 140-10P = 10P 140 10P+0P 40 20P P=3 Th, Equili bnium mica 4uantiny ane 10 2espeitivel wita speific tax 40-10(P+ T) DD ও = 140-10(P+ T) OP Io 21401 130 1 SS: 10P D P SS 1OP 30-10P 10Pt10P 130- 2 P 13 o P 6. 5 10x6-5 65 & cqu quantiry wit speaitis Than tax 6 5

oi te spei fic teex that S০.c० c Rrice S-5 Seuey oi th Speeitic tuat Ps + T Price Consu mor Pc pys 6-5) Pc 7:5 Ps 6-5 146 70 65 gout Revenue (2 = L3.5-6-52 65 C5 DWLE 7-5-6.5)70-652 2 2.5 DWL