The market for tomatoes is competitive and characterized by a demand function of the form QD = 60000 - 4000p and a supply function of the form Qs = 6000p -30000, where quantity is measured in kilograms and p is the price per kilogram. Suppose the government starts to charge sales tax on tomatoes. The tax is at 5% for every dollar a consumer spends on tomatoes. 1. Calculate the equilibrium prices and quantity under the value tax. 2. Calculate the government tax revenue, and the deadweight loss of the tax.

The market for tomatoes is competitive and characterized by a demand function of the form QD = 60000 - 4000p and a supply function of the form Qs = 6000p -30000, where quantity is measured in kilograms and p is the price per kilogram. Suppose the government starts to charge sales tax on tomatoes. The tax is at 5% for every dollar a consumer spends on tomatoes. 1. Calculate the equilibrium prices and quantity under the value tax. 2. Calculate the government tax revenue, and the deadweight loss of the tax.

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter4: Markets In Action

Section: Chapter Questions

Problem 1SQP

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al.pdf ceFinal.pdf (1.35 MB) Demand P=50-200 Q=25-0.5P R F G Search or type URL % 5 V Supply P=35+ QS QS-P-35 24) Refer to Table 4-12. The equations above describe the demand and supply for Bubba's Fried Jellybeans. The equilibrium price and quantity for Bubba's Fried Jellybeans are $40 and 5 thousand units. What is the value of producer surplus? B) $12.5 thousand C) $25 thousand D) $37.5 thousand A) $5 thousand Page Ref: 144-146 T G ^ 6 MacBook Pro B Y H & 7 N U J * Page of 18 0 < I 36 ) 0 L O command P • : ; 24) T option ZOOM + 11 ? = 1 C 11