Suppose the demand for a product is given by P = 100 - 2Q. The supply is given b

Question

Suppose the demand for a product is given by P = 100 - 2Q. The supply is given by P = 20 + 6Q. If an $8 per unit excise tax is levied on the buyers of a good, then after the tax the sellers will receive ______ for each unit of the good.

A) 82
B) 80
C) 74
D) 9
E) None of these

Suppose the demand for a product is given by P = 60 - 2Q. The supply is given by P = 10 + 3Q. If a $10 per unit excise tax is levied on the buyers of a good, the deadweight loss created by this tax will be

A) 10
B) 20
C) 64
D) 5
E) None

Explanation / Answer

1.)If the excise tax is levied on the buyers it will move the demand curve to the left to P= (100-8) -2Q

So we have 92-2Q= 20+6Q
8Q= 72
Q=9 new equilibrium quantity.
So at Q=9 Seller gets 20+6*9= $74 (C)

2.)60-2Q=10+3Q

Q=10

the deadweight loss=tax+Q=10+10=20

So B)$20

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