The market demand function for corn is Qª = 15 - 2P and the market supply function is Q = 5P -2.5, both measured in billions of bushels per year. Suppose that there is a tax of $T per bushel. What are the prices buyers and sellers receive as a function of the tax T? What are the government’s revenue, aggregate surplus, and the deadweight loss as a function of T? What happens to the ratio of the deadweight loss divided by the government's tax revenue as T grows? 15.3 %3D %3D

The market demand function for corn is Qª = 15 - 2P and the market supply function is Q = 5P -2.5, both measured in billions of bushels per year. Suppose that there is a tax of $T per bushel. What are the prices buyers and sellers receive as a function of the tax T? What are the government’s revenue, aggregate surplus, and the deadweight loss as a function of T? What happens to the ratio of the deadweight loss divided by the government's tax revenue as T grows? 15.3 %3D %3D

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter12: The Partial Equilibrium Competitive Model

Section: Chapter Questions

Problem 12.10P

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