Assume the sup ly curves of candies and water have the same

Assume the sup ly curves of candies and water have the same elasticity (they both are unit elastic). If the government imposes the same tax on water and candies, we can affirm that A consumers and producers of candies will share the same tax burden. OB. consumers of water will have higher tax burden than suppliers (water sellers). O C. We cannot conclude anything without specific information on who was levied with the tax (who pays for the tax to the Tax Collection Agency). Dthe deadweight loss will be bigger in the market of candies than in the market of water. E producers of candies will have higher tax burden than consumers.

Solution

1.(B) Consumer of water will have higher tax burden than supplier

This is because supply of water is unit elastic and demand for water is relatively inelastic so with change in price the demand for water will not change much so consumers bear more burden of tax than supplier.

2.(c) Price and quantity supplied decrease and quantity demand increase.

At price of $1.1 there is excess supply in market so to reach equilibrium price and quantity supply will decrease and quantity demanded with increase.

3.(c) MR=MC ; 18 ;500

The profit maximization condition for monopoly is MR=MC. We can determine the price by drawing a vertical line passing through intersection of MR and MC till the demand curve. Demand curve of the consumer gives the price level which is $18 in this case. Quantity at this price level is 500.