1. Suppose the demand for consumer goods is P=100-2Q. The supply of consumer goods is MC=20+0.5Q. a) Calculate the deadweight loss from an excise tax set to be $5 per unit. (HINT: you will need to calculate the equilibrium prices and quantities both with and without the tax. A graph will be very helpful.) b) Calculate the relative tax burden on consumers and producers (how much of the total tax revenues are "paid" by each of consumers and producers).

1. Suppose the demand for consumer goods is P=100-2Q. The supply of consumer goods is MC=20+0.5Q. a) Calculate the deadweight loss from an excise tax set to be $5 per unit. (HINT: you will need to calculate the equilibrium prices and quantities both with and without the tax. A graph will be very helpful.) b) Calculate the relative tax burden on consumers and producers (how much of the total tax revenues are "paid" by each of consumers and producers).

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter6: Supply, Demand And Government Policies

Section: Chapter Questions

Problem 10PA

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Question

1. Suppose the demand for consumer goods is P=100-2Q. The supply of consumer goods is
MC=20+0.5Q.
a) Calculate the deadweight loss from an excise tax set to be $5 per unit. (HINT: you will need to
calculate the equilibrium prices and quantities both with and without the tax. A graph will be very
helpful.)
b) Calculate the relative tax burden on consumers and producers (how much of the total tax
revenues are "paid" by each of consumers and producers).

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