ITER, SIKSHA ‘O’ ANUSANDHAN Assignment
(Deemed to be University)
Branch All Programme [Link].
Course Name Introduction to Microeconomics Semester Third
Course Code HSS 2023 Academic Year 2025-26
Topic: Indirect Tax: Tax on the seller and market
outcome; Public goods and common resources;
Externalities: Negative and positive; Welfare economics:
Consumer surplus, producer surplus, and total surplus;
Assignment: 4
Welfare effects of tax: Tax on the seller and deadweight
loss; Welfare effects of International Trade: Domestic
price, World price, Gains from import; Production; Costs
of Production; Market Structure: Perfect competition.
Learning Level L1: Remembering L3: Applying L5: Evaluating
(LL) L2: Understanding L4: Analysing L6: Creating
Q’s Questions COs LL
Assume the market for Pineapple in San Francisco is perfectly competitive and in
equilibrium. The market demand and supply function for Pineapple is given as
Qd = 1000 – 10P, and Qs = -200 + 20P, where Qd, Qs and P represent the quantity
demanded (kg.), quantity supplied (kg.) and price per kg ($). To increase tax
revenue, the US Government imposes a sales tax of $10 per kilogram of Pineapple
sold by the seller. By constructing a well-labelled supply-demand model,
1 CO4 L3
graphically answer the following:
a) Price paid by buyer after tax per kilogram of Pineapple
b) Price received by seller after tax per kilogram of Pineapple
c) Tax burden on the buyer
d) Tax burden on the seller
e) After tax equilibrium quantity
Analyse under which category the following goods will fall by considering the
characteristics of excludability and rivalry in consumption.
2 CO4 L4
a) National highway with toll tax.
b) 40-meter-tall Paradip Port lighthouse.
‘A fertiliser company located in Paradip, Odisha, emits its smoke into the air and
3 disposes of its waste by dumping it into the river’. Analyse the likely effect of this CO4 L4
activity of the fertilizer company in the context of ‘externality’.
The market demand and supply function in the Potato market of West Bengal is
given as follows: Qd = 10 – 2P, and Qs = -20 + 4P, where Qd, Qs and P represent
the quantity demanded (kg.), quantity supplied (kg.) and price per kg (Rs.)
4 CO5 L3
respectively. By constructing a well-labelled supply-demand model graphically (as
appropriate), calculate consumer surplus, producer surplus and total surplus at the
equilibrium price.
The market demand and supply function for Soybean is given as
Qd = 50 – 2P, and Qs = -10 + 10P, where Qd, Qs and P represent the quantity
demanded (kg.), quantity supplied (kg.) and price per kg of soybean in Rs. If the
5 Govt imposes a sales tax of Rs. 6 per kg of Soybean sold by the seller, then analyse CO5 L4
its effect on economic welfare measured by consumer surplus, producer surplus, tax
revenue, and total surplus. Construct a well-labelled supply-demand model
graphically (as appropriate) to answer the question.
Suppose the US domestic demand and supply for Cardamom are given as: Qd =
3000 – 20P and Qs = 10P, where Qd, Qs, and P represent the quantity demanded (in
kg), quantity supplied (in kg), and price per kg ($). By constructing a well-labelled
6 supply-demand model, graphically (as appropriate) answer the following question. CO5 L4
a) If the world price is $80, then US will import or export cardamom and how
much?
b) Analyse the welfare effect of free trade on US economy, by using the
concept of consumer surplus, producer surplus, and total surplus.
Assume the market for cashews in Punjab is perfectly competitive and in
equilibrium. When the Punjab Govt. imposes a sales tax of Rs. 20 per kg of Cashew
7 CO5 L3
sold by the seller, the equilibrium quantity of cashew decreased from 500 kg to 450
kg. Compute the Dead-Weight Loss arising from the imposition of this tax.
GALA Enterprise engages in the production and sale of brooms. The relationship
between the number of laborers engaged and GALA’s output in a day is stated
below:
8 Labourers (No.) 0 1 2 3 4 5 6 CO6 L3
Output (No.) 0 10 40 80 110 130 140
Compute the average productivity of labour (APL) and the marginal productivity of
labour (MPL).
Your cousin Viraj owns a painting company with a fixed cost $500 and the
following schedule for variable cost:
Quantity of houses painted per month (No.) 0 1 2 3 4 5 6
9 Total variable Cost ($) 0 20 40 80 160 320 640 CO6 L4
Calculate average fixed cost (AFC), average variable cost (AVC), average total cost
(ATC) and marginal cost (MC) and draw the curve for each as appropriate, at each
level of production.
“Under a competitive market structure, individual firms (sellers) are the price
10 CO6 L4
makers, not the price taker”. Will you agree with this? Analyse.
Note:
1. Assignment carries a weightage of 2 marks.
2. The course outcomes four, five, and six were covered.
CO4 Students will be able to analyse the impact of various government policies,
such as price floors, direct and indirect taxes on the market outcome, and the
Course role of government in providing public goods and correcting externalities.
Outcomes CO5 Students will be able to analyse the welfare effects of tax and trade using the
concepts of consumer surplus, producer surplus, and total surplus.
CO6 Students will be able to understand different market structures such as perfect
competition, monopoly, monopolistic competition, and oligopoly,