Question

NAME Discussion Section Number TA Name la. In 1698 Peter I of Russia (Peter the Great or PtG) introduced a tax on beards. On the Marshallian cross diagram in Figure 1, I have indicated the demand for beards which relates the cost of beards to the average length of beards (average beard length is the quantity on the horizontal axis) The cost of beards on the supply curve was 0 in 1698 as Russian men found it more costly to shave than to let their beards grow. Based on these facts, you expect that the average beard length of a Russian man in the pre-tax period would be his consumer surplus from the beard would be the currency of Russia under PIG) inches and rubles (note prices are in rubles, Rubles Figure 1 4 Average Quantity of Beard in Inches lb. Now assume that PtG imposes a tax of 2 rubles per inch on beards, you anticipate that and consumer surplus of Russian men will be the average beard length will be What about consumer surplus of Russian women? lc. Look this up on the internet to find out how the beard tax was collected and how it was enforced.

Answer 1

(a) Based on these facts, you expect that the average beard length of a Russian man in the pre-tax period would be 8 inches and his consumer surplus from the beard would be 8(8)/2 = $32 rubles.

(b)  Now assume that PtG imposes a tax of 2 rubles per inch on beards, you anticipate that average beard length will be 6 inches and consumer surplus of Russian men will be 6(6)/2 = $18.

What about consumer surplus of Russian women?

Due to tax consumer surplus of women might get increased.

(c) A coin as a beard tax receipt was given to the men when they pay the tax. They had to carry that with them and need to show it to the police if asked to do so and if they fail to show the coin they had to pay fine to the police.

(d) Output should be about 26 treatments per day and price should be $16 per trim. Economic profit will be 0. ( At long run equilibrium in monpolistically competitive industry, there is no economic profit.)