Suppose There Are 100 Sellers in a Market, and They

question 80

Essay

Suppose there are 100 sellers in a market, and they each have one unit of a good to sell. There are 100 buyers in this market and the market clears with all of the good traded. Now, government imposes a sales tax on the good. The incidence of the tax is that $3 falls on the buyer and $2 on the seller. What is the maximum amount of revenue that the government may collect from the tax?

---

Definitions:

Neutral US

Refers to a stimulus that does not initially elicit a strong emotional or physiological response, used in behavioral conditioning experiments.

Conditioned Response

A conditioned reaction developed in response to a previously irrelevant stimulus after its frequent association with a stimulus that elicits an automatic response.

Original CS

In classical conditioning, the conditioned stimulus (CS) that is consistently paired with an unconditioned stimulus (US) to produce a conditioned response (CR).

24 Hours

The period of time it takes for the Earth to complete one full rotation on its axis, typically defined as a day.