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Two Economics Problems




Question;1)Widgets are produced by a competitive industry and sold for $5 each. The government requires each widget firm to have a license, and charges the highest license fee firms are willing to pay. If the government were to impose an excise tax of $3 per widget, how much would the license fee have to change? Illustrate your answer as an area on the graph. Would total government revenue (that is, excise tax revenue plus revenue from license fees) rise or fall as a result of the excise tax?2) Suppose the amount of land is fixed in Wyoming. A sales tax on land is imposed.(1) Draw a diagram illustrating the market equilibrium before the sales tax is imposed. (2) What is the effect of the sales tax on the social welfare?


Paper#56915 | Written in 18-Jul-2015

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