ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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The following is a table that contains the demand and supply schedules of chocolate ice creams.

| Price (cents per ice-cream) | Quantity Demanded (millions per day) | Quantity Supplied (millions per day) |
|-----------------------------|--------------------------------------|--------------------------------------|
| $0.90                       | 1                                    | 7                                    |
| $0.80                       | 2                                    | 6                                    |
| $0.70                       | 3                                    | 5                                    |
| $0.60                       | 4                                    | 4                                    |
| $0.50                       | 5                                    | 3                                    |
| $0.40                       | 6                                    | 2                                    |

**Questions:**

a) If there is no tax on ice creams, what is their price and how many are produced and consumed?

b) If a tax of $0.20 is imposed on every ice cream consumed, what happens to the price of an ice cream and the number produced and consumed? Illustrate the effects of this policy on the market for chocolate ice creams.

c) How much tax does the government collect and who pays it?
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Transcribed Image Text:The following is a table that contains the demand and supply schedules of chocolate ice creams. | Price (cents per ice-cream) | Quantity Demanded (millions per day) | Quantity Supplied (millions per day) | |-----------------------------|--------------------------------------|--------------------------------------| | $0.90 | 1 | 7 | | $0.80 | 2 | 6 | | $0.70 | 3 | 5 | | $0.60 | 4 | 4 | | $0.50 | 5 | 3 | | $0.40 | 6 | 2 | **Questions:** a) If there is no tax on ice creams, what is their price and how many are produced and consumed? b) If a tax of $0.20 is imposed on every ice cream consumed, what happens to the price of an ice cream and the number produced and consumed? Illustrate the effects of this policy on the market for chocolate ice creams. c) How much tax does the government collect and who pays it?
Expert Solution
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Step 1

Here, the given table provides information about the amount of quantity demanded and quantity supplied of ice-cream at different price level.

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