The demand and supply functions of a good are respectively P = 600 – q P= 200 + 1/3 q where P is the price per unit and q is the quantity. a. Calculate the equilibrium price and quantity. b. The government decides to impose a tax, t, per unit.Write the supply function after taxation. c. Find the tax (t) per unit that will maximize the total tax revenue (T) on the assumption that equilibrium conditions prevail in the market. Use the second derivative test to verify it. d. Calculate the maximum amount of the total tax revenue (T).
The demand and supply functions of a good are respectively P = 600 – q P= 200 + 1/3 q where P is the price per unit and q is the quantity. a. Calculate the equilibrium price and quantity. b. The government decides to impose a tax, t, per unit.Write the supply function after taxation. c. Find the tax (t) per unit that will maximize the total tax revenue (T) on the assumption that equilibrium conditions prevail in the market. Use the second derivative test to verify it. d. Calculate the maximum amount of the total tax revenue (T).
Micro Economics For Today
10th Edition
ISBN:9781337613064
Author:Tucker, Irvin B.
Publisher:Tucker, Irvin B.
Chapter5: Price Elasticity Of Demand And Supply
Section: Chapter Questions
Problem 25SQ
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The
P = 600 – q
P= 200 + 1/3 q
where P is the
a. Calculate the
b. The government decides to impose a tax, t, per unit.Write the supply function after
c. Find the tax (t) per unit that will maximize the total tax revenue (T) on the assumption that equilibrium conditions prevail in the market. Use the second derivative test to verify it.
d. Calculate the maximum amount of the total tax revenue (T).
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