a) What is the ad valorem tax which will generate the same quantity distortion? b) What is the tax revenue from the ad valorem tax calculated in part a? c) If the government’s objective is to reduce deadweight loss, should they implement a tax?
a) What is the ad valorem tax which will generate the same quantity distortion? b) What is the tax revenue from the ad valorem tax calculated in part a? c) If the government’s objective is to reduce deadweight loss, should they implement a tax?
Chapter14: Monopoly
Section: Chapter Questions
Problem 14.6P
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4. Suppose this market has a single
a) What is the ad valorem tax which will generate the same quantity distortion?
b) What is the tax revenue from the ad valorem tax calculated in part a?
c) If the government’s objective is to reduce
d) If the government is going to implement either a unit tax of 4 or the ad valorem tax you calculated in part a., which one should they chose for the highest tax revenue?
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