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Welcome to the Q&A for ECN/APEC 2010, where you can ask questions and receive answers from your fellow students, the TA, and your professor.

Please only ask questions about the material for the course. Try to create discussions about the material we see in class, instead of just thinking of economics in general (this is an introduction to microeconomics class, not a policy or government class).

For questions and discussions about course organization or other course related topics, come see us after class or during office hours.

Feel free to discuss quiz questions on the Q&A, but do not provide direct answers to quiz questions before the quiz's due date.

Practice quiz 6; Not Graded.

+6 votes
27 views

question 13:

If the government imposes a $10 tax on sellers, the government revenue will be ____.

how would you answer this when equilibrium is at $10.

the answer was $50.

asked Apr 9 by canvas-e415876b4fe9a (251 points)

3 Answers

+2 votes
Neither the supply or demand curve in this problem are elastic therefore the burden of the tax will be equally split between the consumers and producers. The new supply and demand are each 5. If 5 units are sold with a $10 tax on each of them the government makes $50
answered Apr 9 by canvas-9dad53739df91 (261 points)
edited Apr 10 by canvas-9dad53739df91
"Neither the supply or demand curve in this problem are elastic" do you mean they have the same price elasticities? Because every curve has elasticity, especially with a straight constant sloping line, there will be both an elastic and inelastic portion.
+1 vote
With a ten dollar tax, you can either shift supply or demand by ten dollars to the left, or use the tax wedge (where supply and demand are different by $10 at the same quantity). Once you find what quantity supply and demand differ by $10 or shifted one of the curves, you can easily find the government revenue. Government revenue is equal to the amount of the tax ($10) times the quantity traded after the tax (5). So $10 X 5 units = $50 of government revenue.
answered Apr 11 by Chris Vitale TA (460 points)
+1 vote
Well, do you remember the tax wedge we used? What I did was put a $10 tax wedge which stopped at the points (5, $15) on the D curve and (5, $5) on the supply curve then I calculated the Area of Government revenue which was 10 x 5 which equals $50.
answered Apr 13 by canvas-30ee4c0a7a712 (580 points)
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