Reference no: EM132489359

The government is thinking about a tax on potash of $1.00 per kg. The government knows that the elasticity of demand for potash is ε= -0.50, while the elasticity of supply is η=5. The current market equilibrium quantity is 10,000,000 kg, while the current equilibrium price that consumers pay is $5.00 per kg. Suppose that the tax is assessed on producers who collect the tax for the government.

1. What is the statutory incidence of the tax? (show your work)
2. What will be the economic incidence of the tax? ( show your work)
3. What will be the after-tax price that consumers pay? (show your work)
4. What will be the after-tax quantity that consumers buy? ( show your work
5. What will be the after-tax price that producers receive? (show your work)
6. How much revenue will be generated by the tax? (show your work)
7. What will be the dead-weight loss from the tax? (show your work)
8. What will be the efficiency-loss ratio? ( show your work)