Answer to Question #105757 in Microeconomics for kaur

Question #105757
1. Suppose the demand and supply of chickens is given by:

QD = 22,500 – 250P

QS = 5,000 + 100P

c. Suppose a tax of $10 per chicken in imposed. What will be the new equilibrium price (net of tax) and quantity? What is the economic incidence of this tax?
1
Expert's answer
2020-03-18T10:05:37-0400

after the introduction of a tax of $ 10, the equilibrium price of the product will increase, and the volume and revenue from sales will decrease Qs(P)→ Qs(P − 10);

Qd"=" Qs;

"22 500 - 250P=5000 + 100(P - 10);\n22 500 - 250P=5000 + 100 P -1000;"

P"=" $ "52.9" ;

new equilibrium price "=52.9-10=" $ "42.9"

Quantity"= 22500-250\u00d752.9 =" "9275" chickens;

tax amount"=10 \u00d79275="$ "92 750"

sales revenue"= 42.9 \u00d7 9 275="$ "397597.5"

for the sale of chickens, the state will receive a profit of tax in the amount of $ 92 750, and the income of producers will decrease.

 






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