Question

5. Suppose the demand for a particular wine can be described by the function $q^P(p_d) = 100 - p_d$ where $p_d$ is the price paid by the consumer. (a) If a specific (quantity) tax of $t = \$10$ is placed on Wine and this tax is paid by the consumer find the demand for wine as a function of, $p_s$, the price paid to the producer. Recall that $p_d = p_s + t$ You are asked to find $q^P(p_s)$ (b) If an ad valorem tax of $\tau = 20\%$ is place on Wine and this tax is paid by the consumer, find the demand for wine as a function of $p_s$, $q^P(p_s)$. (c) If the supply of the wine is described by the function $q^S(p_s) = 2p_s - 10$ determine the equilibrium (price and quantity) in the market for the cases of (i) no tax, (ii) the specific tax $t = \$10$ and (iii) the ad valorem tax $\tau = 20\%$. (d) For the case of the specific tax $t = \$10$, determine the incidence of the tax and calculate the deadweight loss of taxation. (e) For the case of the specific tax $t = \$10$, find price paid by consumer and received by the firm and the quantity sold when demand is $q^P(p_d) = 100 - p_d$ and the monopolist has marginal cost $mc = 5 + \frac{1}{2}q$.

          5. Suppose the demand for a particular wine can be described by the function
$q^P(p_d) = 100 - p_d$
where $p_d$ is the price paid by the consumer.
(a) If a specific (quantity) tax of $t = \$10$ is placed on Wine and this tax is paid by
the consumer find the demand for wine as a function of, $p_s$, the price paid to the
producer. Recall that
$p_d = p_s + t$
You are asked to find
$q^P(p_s)$
(b) If an ad valorem tax of $\tau = 20\%$ is place on Wine and this tax is paid by the
consumer, find the demand for wine as a function of $p_s$, $q^P(p_s)$.
(c) If the supply of the wine is described by the function
$q^S(p_s) = 2p_s - 10$
determine the equilibrium (price and quantity) in the market for the cases of (i)
no tax, (ii) the specific tax $t = \$10$ and (iii) the ad valorem tax $\tau = 20\%$.
(d) For the case of the specific tax $t = \$10$, determine the incidence of the tax and
calculate the deadweight loss of taxation.
(e) For the case of the specific tax $t = \$10$, find price paid by consumer and received
by the firm and the quantity sold when demand is $q^P(p_d) = 100 - p_d$ and the
monopolist has marginal cost $mc = 5 + \frac{1}{2}q$.

5. Suppose the demand for a particular wine can be described by the function
q^P(pd) = 100 - pd
where pd is the price paid by the consumer.
(a) If a specific (quantity) tax of t = $10 is placed on Wine and this tax is paid by
the consumer find the demand for wine as a function of, ps, the price paid to the
producer. Recall that
pd = ps + t
You are asked to find
q^P(ps)
(b) If an ad valorem tax of τ = 20% is place on Wine and this tax is paid by the
consumer, find the demand for wine as a function of ps, q^P(ps).
(c) If the supply of the wine is described by the function
q^S(ps) = 2ps - 10
determine the equilibrium (price and quantity) in the market for the cases of (i)
no tax, (ii) the specific tax t = $10 and (iii) the ad valorem tax τ = 20%.
(d) For the case of the specific tax t = $10, determine the incidence of the tax and
calculate the deadweight loss of taxation.
(e) For the case of the specific tax t = $10, find price paid by consumer and received
by the firm and the quantity sold when demand is q^P(pd) = 100 - pd and the
monopolist has marginal cost mc = 5 + (1)/(2)q.

Added by Agust-N G.

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