In Order to Reduce Pollution a Country Has Decided to Introduce

question 8

Essay

In order to reduce pollution a country has decided to introduce a tax of $4 per ton of fertilizer. The economic advisors of the country estimate the supply and demand curves for fertilizers as: S=210+75P_S and D=560- 25P_D where D represents the daily demand in tons for fertilizers and p_D is the price of one ton of fertilizers paid by the consumer. S represents the daily supply in tons for fertilizers and p_S is the price actually received by the supplier.
a)What are the pre- tax equilibrium quantities and prices?
b)It has been decided that the tax revenue will be collected from the store selling fertilizers, so that the price advertised to the consumer include the tax. Show graphically the effect of this tax on the market equilibrium quantity and price. Calculate the post- tax equilibrium quantity and prices.
c)What is the tax revenue earned by the government? What is the deadweight loss in surplus brought about by the tax? What proportion of the tax will be borne by the consumer?

Understand the inverted-U theory of R&D in terms of its relationship with industry concentration.

Identify the optimal amount of R&D spending for a firm based on economic considerations.

Comprehend the concept of creative destruction and its impact on competition and market structures.

Distinguish between different sources of financing for R&D (e.g., retained earnings, venture capital).

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Definitions:

Domestic Commercial Contracts

Pertains to agreements made within a country’s borders that are related to the purchase, sale, or exchange of goods and services.

Legal Issues

Disputes or controversies that are submitted to a court for resolution involving questions of law or legal principles.

European Community

An economic and political union established by six European countries in 1957, which expanded and evolved into what is now the European Union (EU), aimed at fostering economic cooperation and integration among its members.

Predecessor

An entity or person who held a position or role before the current holder.