Author Question: Assume the supply function of ice cream is written as: Qs = 100 + 20P - 10Pm, where Qs is the ... (Read 46 times)

kaid0807 · **on:** Jul 1, 2018

Assume the supply function of ice cream is written as: Qs = 100 + 20P - 10Pm, where Qs is the quantity supplied, P is price of ice cream, and Pm is the price of milk (/gallon).

If milk price increases by 2/gallon due to the policy change, how will the Qs change? A) decreases by 20
B) increases by 20
C) decreases by 10
D) increases by 10

Question 2

If government decides to produce a collective consumption good, taxes have to be levied to finance the production. In evaluating government provision then, the benefits of public production have to be _____.

a. high
b. weighed against the excess burden of taxation
c. positive
d. weighted against the tax incidence on poor families