Question 1.
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.
Question2.
Suppose the market forwinein the U.S. is characterized by: 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]