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    Question

    Demand and supply equations were given as Qd = 300 - P, Qs = P/2 and govt imposes specific tax you had to find quantity at which tax revenue is maximized?

    A 20 Correct Answer Incorrect Answer
    B 30 Correct Answer Incorrect Answer
    C 50 Correct Answer Incorrect Answer
    D 40 Correct Answer Incorrect Answer
    E 10 Correct Answer Incorrect Answer

    Solution

    We know that when tax is imposed, Pd = Ps + t Pd – Ps = t 300 – Q = 2Q + t Q* = 100 – t/3 Tax Revenue = t.Q = 100t – t2 / 3 For maximizing tax revenue, 100 – 2t/3 = 0 So, t = 150 Q* = 100 – 50 = 50

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