Intermediate Microeconomics · free preview
Tax Incidence Across Horizons
A 0.5 tax splits 0.4 to buyers and 0.1 to sellers in the short run with steep supply, but the long run's flat entry-driven supply hands the entire tax to buyers, incidence being a property of elasticities and horizons, not of law.
1. The short-run wedge
The short-run wedge
2. The long-run reprice
The long-run reprice
3. Policy across horizons
Policy across horizons
4. The deadweight ledger
The deadweight ledger
5. The short-run split
The 0.5 tax in the short run gives what prices and split?
6. The long-run migration
In the long run what happens to the same tax?
7. Why supply flattens
What makes long-run industry supply flat in this economy?
8. The general incidence law
Where does a tax burden settle in the long run?
9. The new break-even
The tax adds 0.5 to each unit's cost. Compute the new minimum average cost, and write the number.
10. Long-run quantity
Compute demand Q equals 100 minus 10p at p of 2.5, and write the number.
11. The short-run buyer price
The 0.5 tax hits sellers in the short run with supply Q equals 40p and demand Q equals 100 minus 10p. What price do buyers pay?
12. The long-run price
In the long run, where does the price settle after the 0.5 tax?
13. Comparing the horizons' burden
Short run, buyers bear 0.4 of the tax. Long run, they bear 0.5. What general pattern is this?
14. The deadweight comparison
Short-run quantity falls from 80 to 76, long-run quantity falls to 75. How do the deadweight losses compare?
15. Short-run quantity after the tax
With the 0.5 tax, the short-run buyer price is 2.4. Compute quantity demanded, 100 minus 10 times 2.4, and write the number.
16. The long-run deadweight loss
Quantity falls from 80 to 75 under the 0.5 tax in the long run. Compute the deadweight triangle, and write the number with two decimals.
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