Find single price that all mutually preferred trades

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Reference no: EM13859013

The marginal value schedule for Moe and the marginal cost schedule for Larry for apples are shown below.

No. of Apples Moe's MV Larry's MC

1 $10 $1

2 7 2

3 5 4

4 3 5

(a) Find a single price that all mutually preferred trades can occur.

(b) What are the gains from trade?

(c) Now suppose a $1.50 per-unit tax is levied on Larry for each unit sold (that raises MC by $1.50). Now find all mutually preferred trades and the trading prices. Is the demander harmed by a tax levied on the supplier? Explain.

Reference no: EM13859013

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