The demand for a product is given by p + 2q = 250 and the supply by p - 4q = 100. a) Find equilibrium values. b) If a flat-rate tax is imposed on each unit sold, find the optimal tax and the maximum possible tax revenue. Verify that tax revenue is maximum.

The demand for a product is given by p + 2q = 250 and the supply by p - 4q = 100. a) Find equilibrium values. b) If a flat-rate tax is imposed on each unit sold, find the optimal tax and the maximum possible tax revenue. Verify that tax revenue is maximum.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

ChapterP2: Microeconomics Fundamentals

Section: Chapter Questions

Problem 10KC

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Question

The demand for a product is given by p + 2q = 250 and the supply by p - 4q = 100.

a) Find equilibrium values.

b) If a flat-rate tax is imposed on each unit sold, find the optimal tax and the maximum possible tax revenue. Verify that tax revenue is maximum.

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