Suppose instead the government imposes the $3 tax on top of the posted price (i.e. paid by consumers). What is the new equilibrium posted price? How much do the consumers pay for each unit of the good? What is the new market equilibrium quantity? How does consumer surplus and producer surplus compare to those in part (c)? Suppose instead of the tax, the government limits quantity produced to be no more than 36 units. Imagine that in order to produce the good, firms must get permission from the government; the government can thus restrict total production by withholding permissions. What will be the equilibrium price in this scenario? Compare this policy, in terms of how it impacts producers and consumers, to the tax. What would producers prefer, the quantity restriction or the tax?

Suppose instead the government imposes the $3 tax on top of the posted price (i.e. paid by consumers). What is the new equilibrium posted price? How much do the consumers pay for each unit of the good? What is the new market equilibrium quantity? How does consumer surplus and producer surplus compare to those in part (c)? Suppose instead of the tax, the government limits quantity produced to be no more than 36 units. Imagine that in order to produce the good, firms must get permission from the government; the government can thus restrict total production by withholding permissions. What will be the equilibrium price in this scenario? Compare this policy, in terms of how it impacts producers and consumers, to the tax. What would producers prefer, the quantity restriction or the tax?

Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781305971509

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Consumers, Producers, And The Efficiency Of Markets

Section: Chapter Questions

Problem 6PA

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