Equilibrium price .

Question

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Answer 1

Question

Chapter 8, Problem 10PA

Subpart (a):

To determine

Equilibrium price.

Subpart (a):

Expert Solution

Explanation of Solution

The equilibrium price and the quantity are determined at the interaction of the demand curve and the supply curve of the commodity in the market. When the demand and supply for the commodity are equal at a particular price point, the point will be the equilibrium price level and the equilibrium quantity in the economy.

We have given the supply equation and the demand equations and we can equate them in order to obtain the equilibrium price as follows:

Supply = Demand2P = 300−P2P+P=3003P=300P=3003=100

Thus, the equilibrium price is $100. Now we can calculate the equilibrium quantity by substituting the equilibrium price in the equations as follows:

2P=300−P2×100=300−100200=200

Thus, the equilibrium quantity is 200 units.

Economics Concept Introduction

Concept introduction:

Equilibrium: It is the market equilibrium which is determined by equating the supply to the demand. At this equilibrium point, the supply will be equal to the demand and there will be no excess demand or excess supply in the economy. Thus, the economy will be at equilibrium.

Subpart (b):

To determine

Equilibrium price.

Subpart (b):

Expert Solution

Explanation of Solution

We have given the supply equation and the demand equation changes due to the tax on consumers and the new demand equation is QD=300−(P+T) . The equilibrium price and the quantity can be calculated by equating the equations as follows:

Supply = Demand2P = 300−(P+T)3P=300−TP=300−T3P=100−T3

Thus, the price received by the producers is 100−T3 . The consumers will pay a price which is equal to the price received by the producer plus the tax amount which will be equal to 100+2T3 . The quantity sold can be calculated by substituting the price in the equation as follows:

Q=300−(P+T)=300−(100+2T3)=200−2T3

Thus, the quantity is now 200−2T3 .

Economics Concept Introduction

Concept introduction:

Equilibrium: It is the market equilibrium which is determined by equating the supply to the demand. At this equilibrium point, the supply will be equal to the demand and there will be no excess demand or excess supply in the economy. Thus, the economy will be at equilibrium.

Subpart (c):

To determine

Total tax revenue.

Subpart (c):

Expert Solution

Explanation of Solution

We have given that the tax revenue equals to the tax rate multiplied with the quantity. The quantity is calculated in part b as 200−2T3 and the tax revenue can be calculated as follows:

Tax revenue=T×Q=T×(200−2T3)=200T−2T23

This relation between the tax revenue can be illustrated as follows:

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 1

The graph depicts that the tax revenue will be zero at the tax levels of T = $0 and also at the tax rate of T = $300.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Tax revenue: Tax revenue refers to the total revenue earned by the government through imposing tax.

Subpart (d):

To determine

Deadweight loss.

Subpart (d):

Expert Solution

Explanation of Solution

We have given that deadweight loss is the area of the triangle between the demand and supply curves. The following diagram shows, the area of the triangle (laid on its side) that represents the deadweight loss is 1/2 × base × height, where the base is the change in the price, which is the size of the tax (T) and the height is the amount of the decline in quantity ( 2T3 ).

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 2

The deadweight loss can be calculated as follows:

Deadweight loss=12×Size of tax×amount of decline in quantity=12×T×2T3=T23

Thus, the deadweight loss is equal to T23 . The relation is illustrated on the graph as follows:

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 3

In the above diagram horizontal axis measures quantity and vertical axis measures deadweight loss.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Subpart (e):

To determine

Determine the tax amount.

Subpart (e):

Expert Solution

Explanation of Solution

A tax of $200 will not turn out to be a good policy because the tax revenue decreases when the tax rate reaches to $300 where the tax revenue is zero. The tax revenue is at its maximum at the middle of the tax rate of $0 and $300 which is $150. Thus, in order to increase the tax revenue, the government should reduce the tax rate to $150 from $200 which will be the good alternative policy.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

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Students have asked these similar questions

a) Assume there are two firms, 1 and 2, competing as Cournot duopolists in a market, selling a homogeneous product. Demand is given by p = 36 – (q1 + q2), where p is price and q1 and q2 are the outputs of firms 1 and 2 respectively. Each firm faces a marginal cost of 6 per unit of output and no fixed cost. Find each firm’s optimal output, the price at which they sell, each firm’s profit , and consumer surplus. b) Now assume that the firms face the same costs, but horizontally differentiate their product, so that firm 1 faces demand p1 = 36 – (q1 + q2/2) and firm 2 faces demand p2 = 36 – (q1/2 + q2). Assume Cournot competition. Calculate the new equilibrium prices and outputs for each firm, consumer surplus and profits. c) Now assume that rather than facing a given degree of product differentiation, the firms can choosehowdifferentiatedtheirproductsare.Thisisequivalenttoinversedemandequationsp1 =36 –(q1 +θq2)andp2 =36–(θq1 +q2),0≤θ≤1,withθdeterminedbythefirms’choicesofproduct…

Assume there are two firms, 1 and 2, competing as Cournot duopolists in a market, selling a homogeneous product. Demand is given by p = 36 – (q1 + q2), where p is price and q1 and q2 are the outputs of firms 1 and 2 respectively. Each firm faces a marginal cost of 6 per unit of output and no fixed cost. Find each firm’s optimal output, the price at which they sell, each firm’s profit , and consumer surplus.

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Answer 2

Question

Chapter 8, Problem 10PA

Subpart (a):

To determine

Equilibrium price.

Subpart (a):

Expert Solution

Explanation of Solution

The equilibrium price and the quantity are determined at the interaction of the demand curve and the supply curve of the commodity in the market. When the demand and supply for the commodity are equal at a particular price point, the point will be the equilibrium price level and the equilibrium quantity in the economy.

We have given the supply equation and the demand equations and we can equate them in order to obtain the equilibrium price as follows:

Supply = Demand2P = 300−P2P+P=3003P=300P=3003=100

Thus, the equilibrium price is $100. Now we can calculate the equilibrium quantity by substituting the equilibrium price in the equations as follows:

2P=300−P2×100=300−100200=200

Thus, the equilibrium quantity is 200 units.

Economics Concept Introduction

Concept introduction:

Equilibrium: It is the market equilibrium which is determined by equating the supply to the demand. At this equilibrium point, the supply will be equal to the demand and there will be no excess demand or excess supply in the economy. Thus, the economy will be at equilibrium.

Subpart (b):

To determine

Equilibrium price.

Subpart (b):

Expert Solution

Explanation of Solution

We have given the supply equation and the demand equation changes due to the tax on consumers and the new demand equation is QD=300−(P+T) . The equilibrium price and the quantity can be calculated by equating the equations as follows:

Supply = Demand2P = 300−(P+T)3P=300−TP=300−T3P=100−T3

Thus, the price received by the producers is 100−T3 . The consumers will pay a price which is equal to the price received by the producer plus the tax amount which will be equal to 100+2T3 . The quantity sold can be calculated by substituting the price in the equation as follows:

Q=300−(P+T)=300−(100+2T3)=200−2T3

Thus, the quantity is now 200−2T3 .

Economics Concept Introduction

Concept introduction:

Equilibrium: It is the market equilibrium which is determined by equating the supply to the demand. At this equilibrium point, the supply will be equal to the demand and there will be no excess demand or excess supply in the economy. Thus, the economy will be at equilibrium.

Subpart (c):

To determine

Total tax revenue.

Subpart (c):

Expert Solution

Explanation of Solution

We have given that the tax revenue equals to the tax rate multiplied with the quantity. The quantity is calculated in part b as 200−2T3 and the tax revenue can be calculated as follows:

Tax revenue=T×Q=T×(200−2T3)=200T−2T23

This relation between the tax revenue can be illustrated as follows:

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 1

The graph depicts that the tax revenue will be zero at the tax levels of T = $0 and also at the tax rate of T = $300.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Tax revenue: Tax revenue refers to the total revenue earned by the government through imposing tax.

Subpart (d):

To determine

Deadweight loss.

Subpart (d):

Expert Solution

Explanation of Solution

We have given that deadweight loss is the area of the triangle between the demand and supply curves. The following diagram shows, the area of the triangle (laid on its side) that represents the deadweight loss is 1/2 × base × height, where the base is the change in the price, which is the size of the tax (T) and the height is the amount of the decline in quantity ( 2T3 ).

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 2

The deadweight loss can be calculated as follows:

Deadweight loss=12×Size of tax×amount of decline in quantity=12×T×2T3=T23

Thus, the deadweight loss is equal to T23 . The relation is illustrated on the graph as follows:

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 3

In the above diagram horizontal axis measures quantity and vertical axis measures deadweight loss.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Subpart (e):

To determine

Determine the tax amount.

Subpart (e):

Expert Solution

Explanation of Solution

A tax of $200 will not turn out to be a good policy because the tax revenue decreases when the tax rate reaches to $300 where the tax revenue is zero. The tax revenue is at its maximum at the middle of the tax rate of $0 and $300 which is $150. Thus, in order to increase the tax revenue, the government should reduce the tax rate to $150 from $200 which will be the good alternative policy.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Chapter 8, Problem 10PA

Subpart (a):

To determine

Equilibrium price.

Subpart (a):

Expert Solution

Explanation of Solution

The equilibrium price and the quantity are determined at the interaction of the demand curve and the supply curve of the commodity in the market. When the demand and supply for the commodity are equal at a particular price point, the point will be the equilibrium price level and the equilibrium quantity in the economy.

We have given the supply equation and the demand equations and we can equate them in order to obtain the equilibrium price as follows:

Supply = Demand2P = 300−P2P+P=3003P=300P=3003=100

Thus, the equilibrium price is $100. Now we can calculate the equilibrium quantity by substituting the equilibrium price in the equations as follows:

2P=300−P2×100=300−100200=200

Thus, the equilibrium quantity is 200 units.

Economics Concept Introduction

Concept introduction:

Equilibrium: It is the market equilibrium which is determined by equating the supply to the demand. At this equilibrium point, the supply will be equal to the demand and there will be no excess demand or excess supply in the economy. Thus, the economy will be at equilibrium.

Subpart (b):

To determine

Equilibrium price.

Subpart (b):

Expert Solution

Explanation of Solution

We have given the supply equation and the demand equation changes due to the tax on consumers and the new demand equation is QD=300−(P+T) . The equilibrium price and the quantity can be calculated by equating the equations as follows:

Supply = Demand2P = 300−(P+T)3P=300−TP=300−T3P=100−T3

Thus, the price received by the producers is 100−T3 . The consumers will pay a price which is equal to the price received by the producer plus the tax amount which will be equal to 100+2T3 . The quantity sold can be calculated by substituting the price in the equation as follows:

Q=300−(P+T)=300−(100+2T3)=200−2T3

Thus, the quantity is now 200−2T3 .

Economics Concept Introduction

Concept introduction:

Equilibrium: It is the market equilibrium which is determined by equating the supply to the demand. At this equilibrium point, the supply will be equal to the demand and there will be no excess demand or excess supply in the economy. Thus, the economy will be at equilibrium.

Subpart (c):

To determine

Total tax revenue.

Subpart (c):

Expert Solution

Explanation of Solution

We have given that the tax revenue equals to the tax rate multiplied with the quantity. The quantity is calculated in part b as 200−2T3 and the tax revenue can be calculated as follows:

Tax revenue=T×Q=T×(200−2T3)=200T−2T23

This relation between the tax revenue can be illustrated as follows:

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 1

The graph depicts that the tax revenue will be zero at the tax levels of T = $0 and also at the tax rate of T = $300.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Tax revenue: Tax revenue refers to the total revenue earned by the government through imposing tax.

Subpart (d):

To determine

Deadweight loss.

Subpart (d):

Expert Solution

Explanation of Solution

We have given that deadweight loss is the area of the triangle between the demand and supply curves. The following diagram shows, the area of the triangle (laid on its side) that represents the deadweight loss is 1/2 × base × height, where the base is the change in the price, which is the size of the tax (T) and the height is the amount of the decline in quantity ( 2T3 ).

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 2

The deadweight loss can be calculated as follows:

Deadweight loss=12×Size of tax×amount of decline in quantity=12×T×2T3=T23

Thus, the deadweight loss is equal to T23 . The relation is illustrated on the graph as follows:

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 3

In the above diagram horizontal axis measures quantity and vertical axis measures deadweight loss.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Subpart (e):

To determine

Determine the tax amount.

Subpart (e):

Expert Solution

Explanation of Solution

A tax of $200 will not turn out to be a good policy because the tax revenue decreases when the tax rate reaches to $300 where the tax revenue is zero. The tax revenue is at its maximum at the middle of the tax rate of $0 and $300 which is $150. Thus, in order to increase the tax revenue, the government should reduce the tax rate to $150 from $200 which will be the good alternative policy.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 8, Problem 10PA

Subpart (a):

To determine

Equilibrium price.

Subpart (a):

Expert Solution

Explanation of Solution

The equilibrium price and the quantity are determined at the interaction of the demand curve and the supply curve of the commodity in the market. When the demand and supply for the commodity are equal at a particular price point, the point will be the equilibrium price level and the equilibrium quantity in the economy.

We have given the supply equation and the demand equations and we can equate them in order to obtain the equilibrium price as follows:

Supply = Demand2P = 300−P2P+P=3003P=300P=3003=100

Thus, the equilibrium price is $100. Now we can calculate the equilibrium quantity by substituting the equilibrium price in the equations as follows:

2P=300−P2×100=300−100200=200

Thus, the equilibrium quantity is 200 units.

Economics Concept Introduction

Concept introduction:

Equilibrium: It is the market equilibrium which is determined by equating the supply to the demand. At this equilibrium point, the supply will be equal to the demand and there will be no excess demand or excess supply in the economy. Thus, the economy will be at equilibrium.

Subpart (b):

To determine

Equilibrium price.

Subpart (b):

Expert Solution

Explanation of Solution

We have given the supply equation and the demand equation changes due to the tax on consumers and the new demand equation is QD=300−(P+T) . The equilibrium price and the quantity can be calculated by equating the equations as follows:

Supply = Demand2P = 300−(P+T)3P=300−TP=300−T3P=100−T3

Thus, the price received by the producers is 100−T3 . The consumers will pay a price which is equal to the price received by the producer plus the tax amount which will be equal to 100+2T3 . The quantity sold can be calculated by substituting the price in the equation as follows:

Q=300−(P+T)=300−(100+2T3)=200−2T3

Thus, the quantity is now 200−2T3 .

Economics Concept Introduction

Concept introduction:

Equilibrium: It is the market equilibrium which is determined by equating the supply to the demand. At this equilibrium point, the supply will be equal to the demand and there will be no excess demand or excess supply in the economy. Thus, the economy will be at equilibrium.

Subpart (c):

To determine

Total tax revenue.

Subpart (c):

Expert Solution

Explanation of Solution

We have given that the tax revenue equals to the tax rate multiplied with the quantity. The quantity is calculated in part b as 200−2T3 and the tax revenue can be calculated as follows:

Tax revenue=T×Q=T×(200−2T3)=200T−2T23

This relation between the tax revenue can be illustrated as follows:

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 1

The graph depicts that the tax revenue will be zero at the tax levels of T = $0 and also at the tax rate of T = $300.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Tax revenue: Tax revenue refers to the total revenue earned by the government through imposing tax.

Subpart (d):

To determine

Deadweight loss.

Subpart (d):

Expert Solution

Explanation of Solution

We have given that deadweight loss is the area of the triangle between the demand and supply curves. The following diagram shows, the area of the triangle (laid on its side) that represents the deadweight loss is 1/2 × base × height, where the base is the change in the price, which is the size of the tax (T) and the height is the amount of the decline in quantity ( 2T3 ).

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 2

The deadweight loss can be calculated as follows:

Deadweight loss=12×Size of tax×amount of decline in quantity=12×T×2T3=T23

Thus, the deadweight loss is equal to T23 . The relation is illustrated on the graph as follows:

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 3

In the above diagram horizontal axis measures quantity and vertical axis measures deadweight loss.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Subpart (e):

To determine

Determine the tax amount.

Subpart (e):

Expert Solution

Explanation of Solution

A tax of $200 will not turn out to be a good policy because the tax revenue decreases when the tax rate reaches to $300 where the tax revenue is zero. The tax revenue is at its maximum at the middle of the tax rate of $0 and $300 which is $150. Thus, in order to increase the tax revenue, the government should reduce the tax rate to $150 from $200 which will be the good alternative policy.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 8, Problem 10PA

Subpart (a):

To determine

Equilibrium price.

Subpart (a):

Expert Solution

Explanation of Solution

The equilibrium price and the quantity are determined at the interaction of the demand curve and the supply curve of the commodity in the market. When the demand and supply for the commodity are equal at a particular price point, the point will be the equilibrium price level and the equilibrium quantity in the economy.

We have given the supply equation and the demand equations and we can equate them in order to obtain the equilibrium price as follows:

Supply = Demand2P = 300−P2P+P=3003P=300P=3003=100

Thus, the equilibrium price is $100. Now we can calculate the equilibrium quantity by substituting the equilibrium price in the equations as follows:

2P=300−P2×100=300−100200=200

Thus, the equilibrium quantity is 200 units.

Economics Concept Introduction

Concept introduction:

Equilibrium: It is the market equilibrium which is determined by equating the supply to the demand. At this equilibrium point, the supply will be equal to the demand and there will be no excess demand or excess supply in the economy. Thus, the economy will be at equilibrium.

Subpart (b):

To determine

Equilibrium price.

Subpart (b):

Expert Solution

Explanation of Solution

We have given the supply equation and the demand equation changes due to the tax on consumers and the new demand equation is QD=300−(P+T) . The equilibrium price and the quantity can be calculated by equating the equations as follows:

Supply = Demand2P = 300−(P+T)3P=300−TP=300−T3P=100−T3

Thus, the price received by the producers is 100−T3 . The consumers will pay a price which is equal to the price received by the producer plus the tax amount which will be equal to 100+2T3 . The quantity sold can be calculated by substituting the price in the equation as follows:

Q=300−(P+T)=300−(100+2T3)=200−2T3

Thus, the quantity is now 200−2T3 .

Economics Concept Introduction

Concept introduction:

Equilibrium: It is the market equilibrium which is determined by equating the supply to the demand. At this equilibrium point, the supply will be equal to the demand and there will be no excess demand or excess supply in the economy. Thus, the economy will be at equilibrium.

Subpart (c):

To determine

Total tax revenue.

Subpart (c):

Expert Solution

Explanation of Solution

We have given that the tax revenue equals to the tax rate multiplied with the quantity. The quantity is calculated in part b as 200−2T3 and the tax revenue can be calculated as follows:

Tax revenue=T×Q=T×(200−2T3)=200T−2T23

This relation between the tax revenue can be illustrated as follows:

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 1

The graph depicts that the tax revenue will be zero at the tax levels of T = $0 and also at the tax rate of T = $300.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Tax revenue: Tax revenue refers to the total revenue earned by the government through imposing tax.

Subpart (d):

To determine

Deadweight loss.

Subpart (d):

Expert Solution

Explanation of Solution

We have given that deadweight loss is the area of the triangle between the demand and supply curves. The following diagram shows, the area of the triangle (laid on its side) that represents the deadweight loss is 1/2 × base × height, where the base is the change in the price, which is the size of the tax (T) and the height is the amount of the decline in quantity ( 2T3 ).

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 2

The deadweight loss can be calculated as follows:

Deadweight loss=12×Size of tax×amount of decline in quantity=12×T×2T3=T23

Thus, the deadweight loss is equal to T23 . The relation is illustrated on the graph as follows:

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 3

In the above diagram horizontal axis measures quantity and vertical axis measures deadweight loss.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Subpart (e):

To determine

Determine the tax amount.

Subpart (e):

Expert Solution

Explanation of Solution

A tax of $200 will not turn out to be a good policy because the tax revenue decreases when the tax rate reaches to $300 where the tax revenue is zero. The tax revenue is at its maximum at the middle of the tax rate of $0 and $300 which is $150. Thus, in order to increase the tax revenue, the government should reduce the tax rate to $150 from $200 which will be the good alternative policy.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Answer 6

Chapter 8, Problem 10PA

Subpart (a):

To determine

Equilibrium price.

Subpart (a):

Expert Solution

Explanation of Solution

The equilibrium price and the quantity are determined at the interaction of the demand curve and the supply curve of the commodity in the market. When the demand and supply for the commodity are equal at a particular price point, the point will be the equilibrium price level and the equilibrium quantity in the economy.

We have given the supply equation and the demand equations and we can equate them in order to obtain the equilibrium price as follows:

Supply = Demand2P = 300−P2P+P=3003P=300P=3003=100

Thus, the equilibrium price is $100. Now we can calculate the equilibrium quantity by substituting the equilibrium price in the equations as follows:

2P=300−P2×100=300−100200=200

Thus, the equilibrium quantity is 200 units.

Economics Concept Introduction

Concept introduction:

Equilibrium: It is the market equilibrium which is determined by equating the supply to the demand. At this equilibrium point, the supply will be equal to the demand and there will be no excess demand or excess supply in the economy. Thus, the economy will be at equilibrium.

Answer 7

Chapter 8, Problem 10PA

Subpart (a):

To determine

Equilibrium price.

Answer 8

Subpart (a):

Expert Solution

Explanation of Solution

The equilibrium price and the quantity are determined at the interaction of the demand curve and the supply curve of the commodity in the market. When the demand and supply for the commodity are equal at a particular price point, the point will be the equilibrium price level and the equilibrium quantity in the economy.

We have given the supply equation and the demand equations and we can equate them in order to obtain the equilibrium price as follows:

Supply = Demand2P = 300−P2P+P=3003P=300P=3003=100

Thus, the equilibrium price is $100. Now we can calculate the equilibrium quantity by substituting the equilibrium price in the equations as follows:

2P=300−P2×100=300−100200=200

Thus, the equilibrium quantity is 200 units.

Answer 9

Subpart (a):

Expert Solution

Answer 10

Subpart (a):

Expert Solution

Answer 11

Expert Solution

Answer 12

Economics Concept Introduction

Concept introduction:

Equilibrium: It is the market equilibrium which is determined by equating the supply to the demand. At this equilibrium point, the supply will be equal to the demand and there will be no excess demand or excess supply in the economy. Thus, the economy will be at equilibrium.

Answer 13

Subpart (b):

To determine

Equilibrium price.

Subpart (b):

Expert Solution

Explanation of Solution

We have given the supply equation and the demand equation changes due to the tax on consumers and the new demand equation is QD=300−(P+T) . The equilibrium price and the quantity can be calculated by equating the equations as follows:

Supply = Demand2P = 300−(P+T)3P=300−TP=300−T3P=100−T3

Thus, the price received by the producers is 100−T3 . The consumers will pay a price which is equal to the price received by the producer plus the tax amount which will be equal to 100+2T3 . The quantity sold can be calculated by substituting the price in the equation as follows:

Q=300−(P+T)=300−(100+2T3)=200−2T3

Thus, the quantity is now 200−2T3 .

Economics Concept Introduction

Concept introduction:

Equilibrium: It is the market equilibrium which is determined by equating the supply to the demand. At this equilibrium point, the supply will be equal to the demand and there will be no excess demand or excess supply in the economy. Thus, the economy will be at equilibrium.

Answer 14

Subpart (b):

To determine

Equilibrium price.

Answer 15

Subpart (b):

Expert Solution

Explanation of Solution

We have given the supply equation and the demand equation changes due to the tax on consumers and the new demand equation is QD=300−(P+T) . The equilibrium price and the quantity can be calculated by equating the equations as follows:

Supply = Demand2P = 300−(P+T)3P=300−TP=300−T3P=100−T3

Thus, the price received by the producers is 100−T3 . The consumers will pay a price which is equal to the price received by the producer plus the tax amount which will be equal to 100+2T3 . The quantity sold can be calculated by substituting the price in the equation as follows:

Q=300−(P+T)=300−(100+2T3)=200−2T3

Thus, the quantity is now 200−2T3 .

Answer 16

Subpart (b):

Expert Solution

Answer 17

Subpart (b):

Expert Solution

Answer 18

Expert Solution

Answer 19

Economics Concept Introduction

Concept introduction:

Equilibrium: It is the market equilibrium which is determined by equating the supply to the demand. At this equilibrium point, the supply will be equal to the demand and there will be no excess demand or excess supply in the economy. Thus, the economy will be at equilibrium.

Answer 20

Subpart (c):

To determine

Total tax revenue.

Subpart (c):

Expert Solution

Explanation of Solution

We have given that the tax revenue equals to the tax rate multiplied with the quantity. The quantity is calculated in part b as 200−2T3 and the tax revenue can be calculated as follows:

Tax revenue=T×Q=T×(200−2T3)=200T−2T23

This relation between the tax revenue can be illustrated as follows:

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 1

The graph depicts that the tax revenue will be zero at the tax levels of T = $0 and also at the tax rate of T = $300.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Tax revenue: Tax revenue refers to the total revenue earned by the government through imposing tax.

Answer 21

Subpart (c):

To determine

Total tax revenue.

Answer 22

Subpart (c):

Expert Solution

Explanation of Solution

We have given that the tax revenue equals to the tax rate multiplied with the quantity. The quantity is calculated in part b as 200−2T3 and the tax revenue can be calculated as follows:

Tax revenue=T×Q=T×(200−2T3)=200T−2T23

This relation between the tax revenue can be illustrated as follows:

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 1

The graph depicts that the tax revenue will be zero at the tax levels of T = $0 and also at the tax rate of T = $300.

Answer 23

Subpart (c):

Expert Solution

Answer 24

Subpart (c):

Expert Solution

Answer 25

Expert Solution

Answer 26

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Tax revenue: Tax revenue refers to the total revenue earned by the government through imposing tax.

Answer 27

Subpart (d):

To determine

Deadweight loss.

Subpart (d):

Expert Solution

Explanation of Solution

We have given that deadweight loss is the area of the triangle between the demand and supply curves. The following diagram shows, the area of the triangle (laid on its side) that represents the deadweight loss is 1/2 × base × height, where the base is the change in the price, which is the size of the tax (T) and the height is the amount of the decline in quantity ( 2T3 ).

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 2

The deadweight loss can be calculated as follows:

Deadweight loss=12×Size of tax×amount of decline in quantity=12×T×2T3=T23

Thus, the deadweight loss is equal to T23 . The relation is illustrated on the graph as follows:

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 3

In the above diagram horizontal axis measures quantity and vertical axis measures deadweight loss.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Answer 28

Subpart (d):

To determine

Deadweight loss.

Answer 29

Subpart (d):

Expert Solution

Explanation of Solution

We have given that deadweight loss is the area of the triangle between the demand and supply curves. The following diagram shows, the area of the triangle (laid on its side) that represents the deadweight loss is 1/2 × base × height, where the base is the change in the price, which is the size of the tax (T) and the height is the amount of the decline in quantity ( 2T3 ).

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 2

The deadweight loss can be calculated as follows:

Deadweight loss=12×Size of tax×amount of decline in quantity=12×T×2T3=T23

Thus, the deadweight loss is equal to T23 . The relation is illustrated on the graph as follows:

Bundle: Principles of Macroeconomics, Loose-Leaf Version, 7th + Aplia, 1 term Printed Access Card, Chapter 8, Problem 10PA , additional homework tip 3

In the above diagram horizontal axis measures quantity and vertical axis measures deadweight loss.

Answer 30

Subpart (d):

Expert Solution

Answer 31

Subpart (d):

Expert Solution

Answer 32

Expert Solution

Answer 33

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Answer 34

Subpart (e):

To determine

Determine the tax amount.

Subpart (e):

Expert Solution

Explanation of Solution

A tax of $200 will not turn out to be a good policy because the tax revenue decreases when the tax rate reaches to $300 where the tax revenue is zero. The tax revenue is at its maximum at the middle of the tax rate of $0 and $300 which is $150. Thus, in order to increase the tax revenue, the government should reduce the tax rate to $150 from $200 which will be the good alternative policy.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.

Answer 35

Subpart (e):

To determine

Determine the tax amount.

Answer 36

Subpart (e):

Expert Solution

Explanation of Solution

A tax of $200 will not turn out to be a good policy because the tax revenue decreases when the tax rate reaches to $300 where the tax revenue is zero. The tax revenue is at its maximum at the middle of the tax rate of $0 and $300 which is $150. Thus, in order to increase the tax revenue, the government should reduce the tax rate to $150 from $200 which will be the good alternative policy.

Answer 37

Subpart (e):

Expert Solution

Answer 38

Subpart (e):

Expert Solution

Answer 39

Expert Solution

Answer 40

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are many different types of taxes in the economy which include the income tax, property tax and professional tax and so forth.