Hand-written answers and/or hand- drawn graphs will not be
graded. Any answer without clear and precise explanation will
not receive any credit.
[25 points] Suppose the market for cigarettes is
characterized by the following information:
Qd=70–5P [Demand] Qs =3P–10 [Supply]
Suppose the government imposes a sales tax of $2 per unit.
Calculate the Dead-Weight- Loss due to the sales tax.
[Note: P = price per unit; Qd = thousands of units demanded; Qs =
thousands of units supplied]
Qd = 100 – 20P [Demand]
Qs = 20 + 20P [Supply]
The market for wine in the rest of the world is characterized by:
Qd = 80 – 20P [Demand]
Qs = 40 + 20P [Supply]
Calculate the deadweight loss if the U.S. imposes a prohibitive
tariff per unit of imported wine.
[Note: P = price per unit; Qd = billions of units demanded; Qs =
billions of units supplied]