In the Village of Punjab, Sheryl Owns a Well, Which

question 390

Essay

In the Village of Punjab, Sheryl owns a well, which is the only source of drinking water. The supply of water is perfectly inelastic at a quantity of 1,000 gallons of water per day. At a price of $2.00 per gallon, the quantity demanded per day is 1,000 gallons. The government imposes a $0.50 per gallon tax.
a) After the tax is imposed, what is the price paid by the villagers? What is the price received by Sheryl?
b) How much revenue does the government collect?
c) What fraction of the tax does Sheryl pay? What fraction is paid by the villagers?

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Definitions:

Filtration Membrane

A semipermeable barrier that separates particles in a fluid, commonly found in the kidneys for waste removal from the blood.

Bowman Capsule

The Bowman capsule is a cup-like sack at the beginning of the tubular component of a nephron in the kidney, enclosing the glomerulus and involved in filtration.

Countercurrent Mechanism

A process by which fluids flow in opposite directions in adjacent tubes, exchanging properties (such as heat or concentration) to facilitate efficient transfer.

Uric Acid

A waste product formed from the breakdown of purines, excreted in urine.