A specific tax $t$ per unit is imposed on a good with demand $Q_{d}=500-5P$ and pre‑tax supply $Q_{s}=-100+10P$.
(a) Find the tax rate that would raise exactly $2000$ in tax revenue.
(b) Using that tax rate, calculate the dead‑weight loss associated with the tax.
Give your answers rounded to two decimal places.

Question

A specific tax $t$ per unit is imposed on a good with demand $Q_{d}=500-5P$ and pre‑tax supply $Q_{s}=-100+10P$.  
(a) Find the tax rate that would raise exactly $2000$ in tax revenue.  
(b) Using that tax rate, calculate the dead‑weight loss associated with the tax.  
Give your answers rounded to two decimal places.

Accepted Answer

Tax = 7.25 per unit; DWL = 87.60

Gce Model Questions Vol1 2021 Economics Question 44

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