3. Suppose demand and supply for your company's product is given by 1 1 Qd = 14 P and Q 2 - Pr – 1 4 %3D %3D a. Determine the equilibrium price and quantity for your company's product. Show the equilibrium graphically. b. Suppose a $12 excise tax is imposed on the product. Determine the impact of this excise tax on the equilibrium price and quantity for the product. c. How much tax revenue does the government earn with the $12 tax?

3. Suppose demand and supply for your company's product is given by 1 1 Qd = 14 P and Q 2 - Pr – 1 4 %3D %3D a. Determine the equilibrium price and quantity for your company's product. Show the equilibrium graphically. b. Suppose a $12 excise tax is imposed on the product. Determine the impact of this excise tax on the equilibrium price and quantity for the product. c. How much tax revenue does the government earn with the $12 tax?

Microeconomics: Principles & Policy

14th Edition

ISBN:9781337794992

Author:William J. Baumol, Alan S. Blinder, John L. Solow

Publisher:William J. Baumol, Alan S. Blinder, John L. Solow

Chapter17: Taxation And Resource Allocation

Section: Chapter Questions

Problem 4TY

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Similar questions

In a market where the supply curve is perfectly inelastic how does an excise tax affect the price paid by consumers and the quantity bought and sold?
Under which circumstances does line tax burden fall entirely on consumers?
6a. In a market where the supply curve is inelastic, how does an excise tax affect the price paid by consumers and the quantity exchanged?
Refer to Figure 18-3. Suppose that supply is perfectly elastic and the price of this good is initially in equilibrium at P₁. If an excise tax raises the price from P₁ to P4, the excess burden of the tax is A. the area P₁ CP4- O B. the area P₁ Cq₁0. ER OC. the area P3AP4- O D. the area BFC. O E. impossible to calculate from the given information. PA P3 $ P2 P₁ 0 FIGURE 18-3 O A E: B 92 Quantity image 1 Demand