Public Finance

Suppose the marginal social cost of television sets is $100. This is constant and equal to the average cost of television sets. The annual demand for television sets is given by the following equation: Q = 200,000 – 500P2. If television sets are sold in a perfectly competitive market, calculate the annual number sold. Under what circumstances will the market equilibrium be efficient?

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  1. Suppose the corporate income tax were eliminated and corporate income allocated to shareholders on a pro rata basis according to their proportion of outstanding stock. How would such a change in tax policy affect the excess burden and incidence of the tax, assuming that all forms of investment income are included in a comprehensive income tax base?

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