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An industry's inverse demand was PD = 20 - 0.1Q and its inverse supply was PS...

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Economics

An industry's inverse demand was PD = 20 - 0.1Q and its inversesupply was PS = 4 + 0.1Q.

a. Calculate the consumer surplus, producer surplus, governmentrevenue and deadweight loss for taxes of $4, $8, $12 and $16 perunit sold.

b. Graph government revenue and deadweight loss as functions ofthese tax rates.

c. What tax maximizes government revenue?

Answer & Explanation Solved by verified expert
4.3 Ratings (578 Votes)
Inverse demand function P 20 01QInverse supply function P 4 001QAt equilibrium supply and demand are equal20 01Q 4 01Q 01Q 01Q 20 4 02Q 16 Q 80 unitsP 20 01 80 12 per unitWhen tax 0Consumer surplus 12201280 320Producer surplus 1212480 320Government revenue 0Dead weight    See Answer
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