ECO201: Question1 (b) To Reduce the Number of Diabetes Patients in a Country, the Government has Decided to Impose a tax: Managerial Economics Assignment, SUSS, Singapore

question 1 (b) To reduce the number of diabetes patients in a country, the government has decided to impose a tax on sugar to discourage the consumption of sugar.

Illustrate and compare, with one diagram, the effects on price and quantity in the sugar market when the same amount of tax on sugar is imposed on both the producers and the consumers at the same time.

You will need to explain the shapes of the price elasticities of the market demand and the market supply curves of sugar when you draw the sugar market diagram. Specify the tax revenue and explain which party will end up paying more of the tax.

Question 2 (b) Evaluate the validity of the following statements regarding monopoly. Analyze and justify your answers.

(i) A monopolist with a linear demand curve will never operate at the portion of the demand curve that is inelastic. It will always operate at the midpoint of the demand curve.

(ii) If there are substantial economies of scale to exploit, a monopolist will be more productively efficient than many competitive firms in the market, and the monopolist will also be allocative efficient.