Suppose the Inverse Demand Curve for Good a Is Given

question 5

Essay

Suppose the inverse demand curve for good A is given by the equation P_A = 10 - Q_A/10,and the supply curve is perfectly elastic (horizontal)at $1.Good A is presently taxed at $2 per unit.Good B (which is independent of good A)has an inverse demand curve,P_B = 5 - Q_B/20,and is also perfectly elastic at $1.Good B is untaxed.
(A)How much tax revenue is collected and what is the excess burden of the $2 tax on A?
(B)How much revenue is collected if the tax on good A is reduced to $1 per unit and good B is taxed at $1 per unit?
(C)What is the total excess burden of taxing both goods at $1 per unit?
(D)Which tax system is preferable from the point of view of economic efficiency?

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Definitions:

Corporate Sustainability

Corporate sustainability involves practices and strategies businesses embrace to operate responsibly, minimizing their environmental footprint while ensuring economic and social sustainability.

Limited Partnership

A partnership comprised of one or more general partners who manage the business and are personally liable, and one or more limited partners who are liable only to the extent of their investments.

Limited Partners

Investors in a partnership who are not involved in daily business operations and whose liability is limited to the amount of their investment.

General Partners

Individuals or entities that participate in the management of a partnership and have unlimited liability for its debts.