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Chapter 15 – Market Interventions
Answers to End-of-Chapter Discussion Questions

1. Which is likely to be the more efficient way to raise a given amount of revenue
(in the sense of creating a smaller deadweight loss): a tax on luxury cars or a tax
on all car purchases?
Answer:
The deadweight loss created by taxation will be smaller if goods with more inelastic
demand are taxed. Although without empirical data we cannot determine whether
demand for luxury cars is more or less elastic than the demand for all cars, it is likely that
the demand for all cars will be less elastic, because there are fewer substitutes for cars as
a group. On the other hand, it is possible that luxury car buyers may be relatively
insensitive to price if these cars have unique features, but some years ago, a luxury tax
was imposed on high-ticket items such as luxury cars. Quantity demanded was found to
be very price sensitive.
2. How might tax incidence differ in the short and long run?
Answer:
In a market with free entry and exit, supply is generally more elastic in the long run due
to entry and exit. In addition, demand is likely to be more elastic in the long run as
consumers adapt to price changes. Tax incidence, therefore, is likely to be different in the
short run versus the long run, and both curves may be more elastic. Without more
information about the relative magnitude of the elasticities, it is not possible to specify
the exact direction of this change, although it is certainly likely that consumers will bear
more of the tax.
3. Suppose the government enacts a tax that requires each active firm in a market to
pay an annual fee of F dollars. What effect will this tax have in the short run? In
the long run?
Answer:
A tax that requires each firm to pay a flat annual fee would add to the fixed costs of each
company. Since variable (and marginal) costs remain the same and the number of firms
in the short run is fixed, in the short run, no changes to the market equilibrium occur.
In the long run, firms can move out of the market in response to a decrease in profits. The
increase in the fixed costs will move the average cost curve upward, increasing the
minimum average cost. In other words, the long-run supply curve will shift upward
sufficiently to offset the tax. Since some firms will exit, there will be fewer firms in the
new long-run equilibrium.
15-1
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4. Is there any benefit to a country (in terms of its domestic aggregate surplus) from
subsidizing firms that export to another country when the market in that other
country is perfectly competitive?
Answer:
No. Subsidizing exports to another country where markets are perfectly competitive
produces no benefit to the exporting country. When the government offers an export
subsidy, shippers will export the good up to the point where domestic price exceeds the
price in the importing country by the amount of the subsidy. In other words, the domestic
price of the good will increase by the amount of the subsidy. With the price increase,
producers gain, but consumers are hurt. Additionally, the government loses by expending
money on the subsidy, and the net result is a deadweight loss. Consumption and
production distortions will be created (by stimulating artificially high exports), so
aggregate surplus will decrease.
Answers to Problems
15.1 The market demand function for corn is Qd = 15 - 2P and the market supply
function is Qs = 5P -2.5, both measured in billions of bushels per year. Suppose
the government imposes a $2.10 tax per bushel. What will be the effects on
aggregate surplus, consumer surplus, and producer surplus? What will be the
deadweight loss created by the tax?
Answer:
Before the tax
Initial equilibrium price $2.50 per bushel
Initial equilibrium quantity 10 billion bushels
Initial equilibrium consumer surplus $25 billion
Initial equilibrium producer surplus $10 billion
Initial equilibrium aggregate surplus $35 billion
After the tax

After-tax equilibrium price $4.00 per bushel
After-tax equilibrium quantity 7 billion bushels
After-tax equilibrium consumer surplus $12.25 billion
After-tax equilibrium producer surplus $4.9 billion
Government revenue $14.7 billion
After-tax equilibrium aggregate surplus $31.85 billion
Deadweight loss $3.15 billion
Explanation:
Step 1: Calculating initial market equilibrium without the tax.
The equilibrium: P = $2.50 per bushel when Q = 10 billion bushels.
15-2
Qd = 0 when P = $7.50.
Qs = 0 when P = $0.50.
Step 2: Calculating new levels of consumer surplus (CS), producer surplus (PS), and
aggregate surplus (AS).
We computed the following values for consumer and producer surpluses and aggregate
surplus:
CS = $25 billion.
PS = $10 billion.
AS = $35 billion.
Step 3: Calculating new market equilibrium with the tax.
We first create the new supply function that includes the $2.10 tax per bushel. Rearrange
the supply curve so that price is on the left-hand side, and then add the tax to the right-
hand side. The demand function remains the same. Now we set the new supply function
equal to the demand function to compute the new equilibrium price. Buyers now pay $4
per bushel but sellers receive only $1.90 per bushel (the price paid by consumers less the
tax that sellers have to pay). Substituting $4 into the demand function, we get 7 billion
bushels traded at the new price.
Step 4: Calculating new levels of consumer surplus, producer surplus, and aggregate
surplus.
CS = $12.25 billion.
PS = $4.90 billion.
Government collects = $14.70 billion.
AS = CS + PS + Government collection = $31.85 billion.
Step 5: Calculating the deadweight loss with the tax.
We can calculate deadweight loss (DWL) by comparing the initial aggregate surplus to
the new (after-tax) aggregate surplus: Calculating the area of the DWL triangle: DWL =
$3.15 billion.
15-3
15.2 Compare your answers to Problem 1 and In-Text Exercise 15.1 (page 523) with
the answer to Worked-Out Problem 15.1 (page 522). In each case, what is the
ratio of the deadweight loss to tax revenue? What happens as the tax grows
larger?
Answer:
The ratio of the deadweight loss to tax revenue is:
Tax ($) Tax revenue ($) Deadweight loss Ratio of
($) deadweight loss
to tax revenue
Problem 15.1 2.10 14.70 3.15 0.214
In-Text Exercise 15.1 1.40 11.20 1.40 0.125
Worked-Out Problem 15.1 0.70 6.30 0.35 0.056
As the tax grows larger, the ratio of deadweight loss to tax revenue increases.
Explanation:
The ratio of the deadweight loss to tax revenue is provided in the table above. As the tax
increases, the lost aggregate surplus per dollar of tax collected also increases.
function is Qs = 5P -2.5, both measured in billions of bushels per year. Suppose that there
is a tax of $T per bushel. What are the prices buyers and sellers receive as a function of
the tax T? What are the government’s revenue, aggregate surplus, and the deadweight
loss as a function of T? What happens to the ratio of the deadweight loss divided by the
government’s tax revenue as T grows?
Answer:
As the tax rate increases, the price that buyers pay increases and the price that sellers
receive decreases. Equilibrium quantity decreases. The government's revenue increases.
Aggregate surplus decreases, and deadweight loss increases. As T rises, the ratio of the
deadweight loss divided by the government’s tax revenue will increase.
Explanation:
As the size of the tax increases, the price that buyers pay increases and the price that
sellers receive decreases. Equilibrium quantity decreases. The government's
revenue increases. Aggregate surplus decreases, and deadweight loss increases. As T
rises, the ratio of the deadweight loss divided by the government’s tax revenue will
increase, and as T falls, the ratio of deadweight loss divided by the government's tax
revenue falls. Thus taxes reduce social welfare relative to the size of benefits to
government more as the size of the tax increases, at least in a market with linear supply
and demand curves. This occurs because at higher prices, demand is more elastic, and
thus rising prices reduce quantity by a greater amount. Tax revenues do not rise as
rapidly, and deadweight loss increases faster.
15-4
15.4 Consider again Worked-Out Problem 14.2. The daily demand for pizza is
Qd = 32,900 – 600P, where P is the price of pizza. The daily costs for a pizza
company include $845 in avoidable fixed costs and variable costs equal to
VC = 5Q + Q2 /80, where Q is the number of pizzas produced each day. Marginal
cost when producing Q pizzas is MC = 5 + Q/40. Recall that the price is $11.50,
and the total quantity demanded is 26,000 pizzas per day. In a long-run
equilibrium, each active firm produces 260 pizzas per day, its efficient scale. That
means there are 100 active firms in the initial long-run equilibrium.
Suppose that starting at the initial long-run equilibrium with a price of $11.50 and
100 active firms, the government requires firms to pay a tax of $11.50 per pizza.
What is the amount paid by buyers and received by sellers in the short run? What
is the government revenue? What is the deadweight loss? What about in the long
run?
Answer:
No tax With a tax = $11.50
Short-run equilibrium price 11.50 21.50
Short-run equilibrium quantity 26,000 20,000
Consumer surplus 562,000 333,300
Producer surplus 84,500 50,000
Aggregate surplus 647,400 383,300
Government revenue --- 230,000
Deadweight loss --- 34,490
In the long run, the equilibrium price will be $23 and the quantity will be 19,100.
Relative to the short-run equilibrium, deadweight loss increases.
Explanation:
In the long run, since firms are losing money at the short-run price, some firms will exit.
This will continue until firms just break even. Since the original efficient scale was at a
price of $11.50 and a quantity of 260, the new price will be equal to the old price plus the
tax, $11.50 + $11.50 = $23.00. At this price, the quantity demanded is 32,900 – 600(23)
= 19,100.
Since quantity falls more (as compared to the short-run equilibrium), deadweight loss
will increase.
15-5
15.5 Use a graph to show that, when the government increases the tax on a good, the
sum of the change in consumer surplus plus the change in producer surplus plus
the change in government revenue equals the change in the deadweight loss.
Verify that this relationship holds by comparing the answers to Worked-Out
Problem 15.1 and In-Text Exercise 15.1 (pages 522 and 523).
Answer:
In Worked-Out Problem 15.1, the government imposed a $0.70 tax on the market for
corn, and in In-Text Exercise 15.1, the government imposed a $1.40 tax on the market for
corn. The graph below shows the market for corn with the $0.70 tax. With this tax, A =
$20.25, B = $6.30, C = $8.10, and D = $0.35.
Recall that the market demand function for corn is Qd = 15 - 2P and the market supply
function is Qs = 5P -2.5, both measured in billions of bushels per year. For the tax
increase to $1.40, the change in consumer surplus, producer surplus, and government
revenue, relative to the $0.70 tax is as follows:
15-6
Explanation:
When the government increases the tax on a good, the sum of the change in consumer
surplus plus the change in producer surplus plus the change in government revenue
equals the change in the deadweight loss.
For Worked-Out Problem 15.1: A = $20.25, B = $6.30, C = $8.10, D = $0.35.
For In-Text Problem 15.1 (price rises to $3.50 and quantity falls to 8 billion): A = $16,
B = $11.20, C = $6.40, D = $1.40.
function is Qs = 5P -2.5, both measured in billions of bushels per year. The initial
equilibrium price is $2.50, and the initial equilibrium quantity is 10 billion
bushels. Consumer surplus is $25, producer surplus is $10, and aggregate
surplus is $35. Suppose the government gives corn farmers a subsidy of $0.70 per
bushel of corn. What will be the effects on aggregate surplus, consumer surplus,
and producer surplus? What will be the deadweight loss created by the subsidy?
Answer:
Amount ($)
New level of consumer surplus 30.25 billion
New level of producer surplus 12.1 billion
Cost of the subsidy to government 7.7 billion
New level of aggregate surplus 34.65 billion
Deadweight loss 0.35 billion
15-7
Explanation:
In Problem 15.1, the equilibrium price, quantity, CS, and PS were calculated.
P = $2.50.
Q = 10 billion bushels.
CS = $25.00.
PS = $10.00.
AS = $35.00.
When the government imposes the $0.70 subsidy, the price to consumers decreases. Thus
the quantity increases, but since the CS gain is less than the cost of the subsidy, there is a
deadweight loss due to the additional units, as shown in the graph below.
With the subsidy, the market price will fall to $2.00. After receiving the subsidy, the
price that producers take home is $2.70. The new quantity will be 11.
New CS = (0.5)(8 – 2.70)(11) = $30.25 billion.
New PS = (0.5)(2 – 0.50)(11) = $12.10 billion.
Cost of the subsidy to the government = –(0.70)(11) = $7.70 billion.
New AS = New CS + New PS – Cost to government = 34.65 billion.
Calculate deadweight loss (DWL) by comparing the initial aggregate surplus to the new
(after-subsidy) aggregate surplus (or simply by calculating the area of the triangle in the
graph). Change in DWL = $0.35 billion.
15-8
function is Qs = 5P -2.5, both measured in billions of bushels per year. The initial
equilibrium price is $2.50, and the initial equilibrium quantity is 10 billion bushels.
Consumer surplus is $25, producer surplus is $10 and aggregate surplus is $35. Suppose
the government wants to raise the price of corn to $3. What are the welfare effects of a
price floor, price support, production quota, and voluntary production reduction program?
Answer:
A price floor:
Amount ($)
Consumer surplus 20.25 billion
Producer surplus 14.4 billion
Cost to the government 0 billion
Aggregate surplus 34.65 billion
A price support:
Amount ($)
Cost to the government 10.51 billion
Production quota:
Amount ($)
Cost to the government 0 billion
Voluntary production reduction program:

Amount ($)
Cost to the government 1.23 billion
Explanation:
In Problem 15.1, the equilibrium price, quantity, CS, and PS were calculated.
P = $2.50.
Q = 10 billion bushels.
15-9
CS = $25.00.
PS = $10.00.
AS = $35.00.
A = $20.25, B = $4.50, C = $0.25, D = $9.90, E = $0.10, F = $9.28, and G = $0.88. The

table below shows the value of the surpluses, deadweight loss, and cost to government for
each program. Under a price floor, the government sets the legal maximum price but does
not purchase any corn. Under a price subsidy, the government purchases sufficient corn
to raise the price to the desired price. Under a production quota, the government sets a
limit on the amount that firms can produce; the quantity restriction causes the price to
rise. Under a voluntary production reduction, the government pays firms the value of the
surplus that they would have gained if they had sold their desired amount of units at the
target price.
No Price floor Price Production Voluntary

intervention support quota production
reduction
Aggregate A+B+C+ A+B+D= A+B+D– A+B+D= A+B+D=
surplus D + E = $35 $34.65 F = $25.37 $34.65 $34.65
Deadweight $0 C + E = $0.35 C+E+F= C + E = $0.35 C + E = $0.35
loss $9.63
Consumer A+B+C= A = $20.25 A = $20.25 A = $20.25 A = $20.25
surplus $25
Producer D +E = $10 B+D= B+C+D+ B+D= B+C+D+
surplus $14.40 E+G= $14.40 E+G=
$15.63 $15.63
Cost to $0 $0 -(C + E + F + $0 -(C + E + G)
government G) = = -$1.23
-$10.51
15-10
15.8 Suppose that the demand function for pizzas is Qd = 65,800 – 1,200P. The supply
function is Qs = 4,000P – 20,000. Suppose the pizza parlor industry is effective at
lobbying the government, which institutes a price floor of $15 on pizzas.
Assuming that the least-cost pizza producers are the ones to produce the
demanded pizzas, what is the effect on the aggregate, consumer, and producer
surpluses? What if instead the government raised the price to $15 using a price
support program?
Answer:
Consumer surplus will stay the same, producer surplus will stay the same, and
aggregate surplus will stay the same.
If the government raised the price to $15 using a price support program: Consumer
surplus will stay the same, producer surplus will stay the same, and aggregate surplus
will stay the same.
Explanation:
First solve for the initial equilibrium price with no interventions by equating market
demand and market supply:
Qd = 65,800 – 1,200P =4,000P – 20,000 = Qs

P = $16.50
In this case, the price floor of $15 is set below the equilibrium price of $16.50. The price
floor has no practical effect on consumer surplus, producer surplus, or aggregate surplus
because the government is mandating a minimum price that is below the existing market
price. Likewise, there would be no effect of a similar price support program.
15.9 Suppose that the MILC program described in Read More Online 15.6 had no
cap. The demand function described is Qd = 31.6 – 9.4P. The supply function is
Qs = 6.6 – 10.3P. The equilibrium price for the market without intervention is P =
$1.27, and the equilibrium quantity is Q = 19.7 billion gallons of milk. How much
would the government need to buy to raise the price of milk to $1.40 per gallon
under a price support program? What would be the effects on aggregate surplus,
consumer surplus, producer surplus, and government revenue.
Answer:
The government would need to buy 2.58 billion gallons of milk to raise the price of milk
to $1.40 per gallon under a price support program.
Change in consumer surplus -$2.48 billion

Change in producer surplus $2.65 billion
Change in government revenue -$3.61 billion
Change in aggregate surplus -$3.44 billion
15-11
Explanation:
The equilibrium price for the market without intervention is P = $1.27, and the
equilibrium quantity is Q = 19.67 billion gallons of milk.
Compute quantities demanded and supplied at the price of P = $1.40:
The government will have to buy the difference between the quantity supplied and the
quantity demanded: 21.02 – 18.44 = 2.58 billion gallons.
Computing the areas of the triangles in the figure.
Change in CS = –(B + C) = –$2.48 billion.
Change in PS = B + C + G = $2.65 billion.
Change in government revenue = –(C + E + F + G) = –$3.61 billion.
Change in AS = –(C + E + F) = –$3.44 billion.
15.10 Suppose that the demand function for pizzas is Qd = 65,800 – 1,200P. The supply
function is Qs = 4,000P – 20,000. Suppose the College Student Party is elected
and places a price ceiling on pizza of $10 per pizza. How many pizzas will be
bought and sold? Assuming that the consumers with the highest willingness to
pay are the ones to consume the supplied pizzas, what will the effect be on the
aggregate, consumer, and producer surpluses?
15-12
Answer:
A total of 20,000 pizzas will be bought and sold
Assuming that the consumers with the highest willingness to pay are the ones to consume
the supplied pizzas: consumer surplus will increase, producer surplus will decrease, and
aggregate surplus will decrease.
Explanation:
Let’s first solve for the initial equilibrium price with no interventions. We equate market
demand and market supply to accomplish that:
Qd = 65,800 – 1,200P =4,000P – 20,000 = Qs

P = $16.50
At this price, 46,000 pizzas are bought and sold. With a price ceiling of $10, we compute
that:
Qs = 4,000(10) – 20,000.
Qd=65,800 – 1,200(10) = 53,800.
With a price ceiling in place, the quantity supplied will be smaller than the quantity
demanded, and thus only 20,000 pizzas will be sold (and bought) at the price ceiling of
$10. Consumer surplus will increase, since students who can buy pizzas get a lower price
(and we have assumed that the students who place the highest value on the pizzas get
them), producer surplus will decrease, since fewer pizzas are sold and the price is lower,
and aggregate surplus falls. There is a deadweight loss due to the price ceiling.
function is Qs = 5P - 2.5, both measured in billions of bushels per year. What would
be the welfare effects of a policy that put a cap of $2 per bushel on the price farmers can
charge for corn? (Assume that corn is purchased by the consumers who place the highest
value on it.)
Answer:
Amount ($)
New level of consumer surplus 27.19 billion
New level of producer surplus 5.63 billion
New level of aggregate surplus 32.81 billion
Explanation:
The original equilibrium price is P = $2.50 per bushel and the equilibrium quantity is Q =
10 billion bushels. With a price ceiling of $2 we compute that:
15-13
The quantity that will actually be sold in the market is the quantity supplied. The new
level of consumer surplus is $27.19 billion, and the new level of producer surplus
is $5.63 billion. The new level of aggregate surplus is $32.81 billion Thus, the
deadweight loss is $2.19 billion. The price ceiling increases consumer surplus at the
expense of producer surplus; this change is a transfer from producers to consumers. There
is a deadweight loss because some corn will no longer be sold after imposing the price
ceiling.
function is Qs = 5P - 2.5, both measured in billions of bushels per year. Suppose
the import supply curve is infinitely elastic at a price of $1.50 per bushel. What
would be the welfare effects of a tariff of $0.50 per bushel?
Answer:
Infinitely elastic at a price of $1.50 per bushel
Amount ($)
Consumer surplus 36 billion
The welfare effect of a tariff of $0.50 per bushel

Amount ($)
New consumer surplus 30.25 billion
New Producer surplus 5.63 billion
Government revenue 1.75 billion
New aggregate surplus 37.63 billion
Explanation:
With a world supply curve that is perfectly elastic at $1.50:
Consumer surplus is $36.00 billion, producer surplus is $2.50 billion, and aggregate
surplus is $38.50 billion.
With the tariff, the price rises by $0.50.
15-14
The new level of consumer surplus is $30.25 billion, and the new level of producer
surplus is $5.63 billion. Government revenue is $1.75 billion. The new level of aggregate
surplus is $37.63 billion. Thus, the deadweight loss is $0.88 billion.
15.13 Suppose the import supply curve for a good is infinitely elastic at the world price.
Draw a graph to show the welfare effect of a subsidy on imports.
Answer:
Explanation:
a. Change in consumer surplus: A + B + C + D + E.
b. Change in producer surplus: –(A + B).
c. Change in government revenue: –(B + C + D + E + F).
d. Change in aggregate surplus: –(B + F).
15-15
Consumers are better off because of the lower price of the import, but domestic producers
lose sales and the government loses revenue because of the cost of the subsidy. Since the
losses to producers and the government exceed the gains to consumers, there is a
deadweight loss.
15.14 Suppose the supply curve of imports is infinitely elastic at the world price. Using
a graph show how high a tariff the country must set to completely prevent imports
from coming into the country.
Answer:
To completely prevent imports from coming into a country, a tariff would need to be
equal to Pd - Pw.
Explanation:
When the price equals P*, there are no imports. The tariff needed is the difference
between the domestic equilibrium price (Pd) and the world price (Pw).
15-16
15.15 The country of Widgetium is the only country in which consumers desire to
consume widgets. Suppose the domestic demand for widgets in Widgetium is
Qd = 20 – 2P and the domestic supply is Qs = 5P – 7.5 both measured in millions
of widgets. In addition, there is a perfectly inelastic supply of 2 million foreign
widgets. What tariff on widgets maximizes domestic aggregate surplus?
Answer:
A tariff of $3.64 on widgets maximizes domestic aggregate surplus.
Explanation:
To solve this problem, first find the world supply curve:
Set Qw = Qd.
At this price, domestic firms supply Q = 5(3.64) – 5.5 = 13 million widgets (rounded),
and foreign firms supply 2 million widgets, for a total of 15 million widgets. Since the
foreign supply is perfectly inelastic, the same amount will be supplied at any price. Thus
the optimal tariff simply transfers surplus from foreign producers to the government, and
is equal to the equilibrium price. A lower tariff would reduce revenue to the government,
and a higher tariff would reduce consumer purchases of widgets and create deadweight
loss. Thus, the optimal tariff is $3.64.
Answers to Calculus Problems
15.1 Suppose that the demand for a good is Qd = A – BP and the supply is QS = RP – S,
where A, B, R, and S are all positive numbers. Derive a function P*(T) describing
the equilibrium price as a function of the specific tax T the government places on
the good. What is the derivative of the equilibrium price with respect to T? (This
is known as the “pass-through rate” of the tax.) How does it depend on A, B, R,
and S?
Answer:
[R/(B + R)]T + [(A + S)/(B + R)] describes the equilibrium price as a function of
the specific tax T the government places on the good.
15-17
[R/(B + R)] is the derivative of the equilibrium price with respect to T.
The pass-through rate depends on R and B, the inverses of the slopes of the supply and
demand curves, respectively
Explanation:
Set Qs+T = Qd.
Solving for P gives:
The pass-through rate depends on R and B, the inverses of the slopes of the supply and
demand curves, respectively. B and R are part of the elasticity of demand and supply; in
general, the more inelastic curve will bear most of the tax. Thus, in general, the more
elastic demand is, the lower the pass-through rate, and relatively more of the tax will be
paid by firms. The more elastic supply is, all other things equal, the higher the pass-
through rate, and relatively more of the tax will be paid by consumers.
15.2 Suppose the government needs to raise 15 billion dollars of revenue with specific
taxes on corn and wheat. The demand and supply of corn (in billions of bushels
per year) are Qdcorn = 15 – 2Pcorn and Qscorn = 5Pcorn – 2.5. The demand and supply
of wheat (also in billions of bushels per year) are Qdwheat = 2 – (1/2)Pwheat and
Qswheat = (2/3)Pwheat – 1. What taxes on corn and wheat raise this revenue with the
smallest total deadweight loss (or equivalently, the greatest aggregate surplus)?
15.3 Suppose that the domestic demand for widgets in a country is Qd = 100 – P, the
domestic supply is Qsdom = 2P and the foreign supply is Qsforeign = 2P. Derive an
expression for the domestic aggregate surplus as a function of the tariff rate T
chosen by the government. Show that the tariff rate that maximizes domestic
aggregate surplus is strictly positive.
15.4 [Note: this question requires concepts from Chapters 5 and 6.] Suppose that
each consumer consumes goods X and Y with preferences represented by the
utility function:
15-18
Each consumer has income of $150. The supply curve for good X is horizontal
(perfectly elastic) at a price of $1, while the supply curve of good Y is horizontal
at a price of $2.
a. With no tax, what are the competitive equilibrium prices of goods X and Y?
How much of each good does each consumer purchase?
b. The government has put a specific tax of $1 on purchases of good X. What are
the competitive equilibrium prices of good X and Y with the tax? How much of
each good does each consumer now purchase?
c. Suppose the government decides to give each consumer an income subsidy
(increasing his income above $150) so that he is exactly as well off after the tax as
before the tax. Will the government’s tax revenue exceed the amount of the
subsidy?
Answer:
a. With no tax, the competitive equilibrium price of X is $ 1 and the competitive
equilibrium price of Y is $2. Each consumer will buy 50 units of X and 50 units of Y.
b. The competitive equilibrium price of X is now $2 and the competitive equilibrium

price of Y is $2. Each consumer will now buy 15 units of X and 60 units of Y.
c. It will cost $30 to restore the consumer to the original level of utility. With this level of
income, the consumer will buy 18 units of X and 72 units of Y. Thus, the government will
collect $18 in tax revenue, which is the cost of the income subsidy.
Explanation:
a. Since the supply curves are perfectly elastic, the competitive equilibrium prices of each
good come directly from the supply curves. Each consumer maximizes U(X,Y) subject to
150 = X + 2Y. The Lagrange equation is thus L = +2 + λ(150 - X - 2Y).
Differentiating with respect to X and Y gives the first-order condition, X=Y.
Substituting into the budget constraint gives the optimal quantities, X* = 50, Y* = 50.
Thus, at the competitive equilibrium prices of Px = $1 and Py = $2, each consumer will
purchase 50 units of each good.
b. Since the supply curve for X is horizontal (perfectly elastic), the entire tax is passed on
to consumers. Thus the new competitive equilibrium price of X is $2. Solving the
consumer's maximization problem again (as above) gives the new first-order condition Y
= 4X, and thus X* = 15, Y* = 60.
c. U(50,50) = 3√50, the original level of utility from the bundle in a. To achieve this
utility at the new price ratio requires a bundle of 18X and 72Y. (This is found by using the
first-order condition from part b., Y = 4X, and substituting that relationship into the
utility function. At new prices, this will cost $180, and thus it will cost the government
$30. Tax revenue (given the income subsidy) = $1(18) = $18, which is less than the cost
of the subsidy.
15-19
15.5 [Note: this question requires concepts from Chapters 8 and 9.]
Every widget producer’s technology has cost function
The market demand function for widgets is
Suppose the government is considering a $6 subsidy per widget sold (given to

firms).
a. What would the price, market quantity, and number of active widget producers
be in the long-run competitive equilibrium without the subsidy?
b. What would the price paid by buyers, market quantity, and number of active
widget producers be in the long-run competitive equilibrium with the subsidy?
c. What is the deadweight loss of the subsidy?
Answer:
a. Competitive price = $32
Market quantity = 1,200
Number of active firms = 100
b. Competitive price = $26

Market quantity = 1,800
Number of active firms = 150
c. Deadweight loss = $1,800
Explanation:
a. Perfect competition implies that P = MC at the profit-maximizing point. To find the
long-run price, set MC = AC:
Firm quantity is 12, and price is $32. Substitute into the demand curve to get the
equilibrium quantity: Q = 1,200. Since each firm will produce 12 units, there will be 100
firms.
b. With the subsidy, the new cost function will be:
15-20
Another random document with
no related content on Scribd:
que en aquella ribera deleitosa
de Nemoroso fue tan celebrada;
porque de todo aquesto y cada cosa
estaba Nise ya tan informada,
que llorando el pastor, mil veces ella 255
se enterneció escuchando su querella.
Y porque aqueste lamentable cuento,
no solo entre las selvas se contase,
mas, dentro de las ondas, sentimiento
con la noticia de esto se mostrase, 260
quiso que de su tela el argumento
la bella ninfa muerta señalase,
y así se publicase de uno en uno
por el húmido reino de Netuno.
Destas historias tales variadas 265
eran las telas de las cuatro hermanas,
las cuales, con colores matizadas
y claras luces de las sombras vanas,
mostraban a los ojos relevadas
las cosas y figuras que eran llanas; 270
tanto que, al parecer, el cuerpo vano
pudiera ser tomado con la mano.[244]
Los rayos ya del sol se trastornaban,[245]
escondiendo su luz, al mundo cara,
tras altos montes, y a la luna daban 275
lugar para mostrar su blanca cara;
los peces a menudo ya saltaban,
con la cola azotando el agua clara,
cuando las ninfas, la labor dejando,
hacia el agua se fueron paseando. 280
En las templadas ondas ya metidos
tenían los pies, y reclinar querían
los blancos cuerpos, cuando sus oídos
fueron de dos zampoñas que tañían
suave y dulcemente, detenidos; 285
tanto, que sin mudarse las oían,
y al son de las zampoñas escuchaban
dos pastores, a veces, que cantaban.
Más claro cada vez el son se oía
de dos pastores, que venían cantando 290
tras el ganado, que también venía
por aquel verde soto caminando,
y a la majada, ya pasado el día,
recogido llevaban, alegrando
las verdes selvas con el son suave, 295
haciendo su trabajo menos grave.
Tirreno destos dos el uno era,
Alcino el otro, entrambos estimados,
y sobre cuantos pacen la ribera
del Tajo, con sus vacas, enseñados; 300
mancebos de una edad, de una manera
a cantar juntamente aparejados,
y a responder. Aquesto van diciendo,
cantando el uno, el otro respondiendo.
TIRRENO
Flérida, para mí dulce y sabrosa 305

más que la fruta del cercado ajeno,[246]
más blanca que la leche y más hermosa
que el prado por abril, de flores lleno;
si tú respondes pura y amorosa
al verdadero amor de tu Tirreno, 310
a mi majada arribarás, primero
que el cielo nos amuestre su lucero.
ALCINO
Hermosa Filis, siempre yo te sea

amargo al gusto más que la retama,
y de ti despojado yo me vea, 315
cual queda el tronco de su verde rama,
si más que yo el murciélago desea
la escuridad, ni más la luz desama,
por ver ya el fin de un término tamaño
deste día, para mí mayor que un año. 320
TIRRENO
Cual suele acompañada de su bando

aparecer la dulce primavera,
cuando Favonio y Céfiro soplando,[247]
al campo toman su beldad primera,
y van artificiosos esmaltando 325
de rojo, azul y blanco la ribera;
en tal manera a mí, Flérida mía,
viniendo, reverdece mi alegría.
ALCINO
¿Ves el furor del animoso viento,

embravecido en la fragosa sierra, 330
que los antiguos robles ciento a ciento
y los pinos altísimos atierra,
y de tanto destrozo aún no contento,
al espantoso mar mueve la guerra?
Pequeña es esta furia, comparada 335
a la de Filis, con Alcino airada.
TIRRENO
El blanco trigo multiplica y crece,

produce el campo en abundancia tierno
pasto al ganado, el verde monte ofrece
a las fieras salvajes su gobierno; 340
adoquiera que miro me parece
que derrama la copia todo el cuerno;[248]
mas todo se convertirá en abrojos
si dello aparta Flérida sus ojos.
ALCINO
De la esterilidad es oprimido 345

el monte, el campo, el soto y el ganado;
la malicia del aire corrompido
hace morir la hierba mal su grado;[249]
las aves ven su descubierto nido,
que ya de verdes hojas fue cercado; 350
pero si Filis por aquí tornare,
hará reverdecer cuanto mirare.
TIRRENO
El álamo de Alcides escogido

fue siempre, y el laurel del rojo Apolo;
de la hermosa Venus fue tenido 355
en precio y en estima el mirto solo;
el verde sauz de Flérida es querido,
y por suyo entre todos escogiolo;[250]
doquiera que de hoy más sauces se hallen,
el álamo, el laurel y el mirto callen. 360
ALCINO
El fresno por la selva en hermosura

sabemos ya que sobre todos vaya,
y en aspereza y monte de espesura
se aventaja la verde y alta haya;
mas el que la beldad de tu figura 365
dondequiera mirado, Filis, haya,
al fresno y a la haya en su aspereza
confesará que vence tu belleza.—
Esto cantó Tirreno, y esto Alcino

le respondió; y habiendo ya acabado 370
el dulce son, siguieron su camino
con paso un poco más apresurado.
Siendo a las ninfas ya el rumor vecino,
todas juntas se arrojan por el vado,
y de la blanca espuma que movieron 375
las cristalinas hondas se cubrieron.
ELEGÍA PRIMERA
Aunque este grave caso haya tocado[251]

con tanto sentimiento el alma mía,
que de consuelo estoy necesitado,
con que de su dolor mi fantasía
se descargase un poco, y se acabase 5
de mi continuo llanto la porfía,
quise, pero, probar si me bastase[252]
el ingenio a escribirte algún consuelo,
estando cual estoy, que aprovechase
para que tu reciente desconsuelo 10
la furia mitigase, si las musas
pueden un corazón alzar del suelo
y poner fin a las querellas que usas,
con que de Pindo ya las moradoras
se muestran lastimadas y confusas; 15
que, según he sabido, ni a las horas
que el sol se muestra ni en el mar se esconde,
de tu lloroso estado no mejoras;
antes en él permaneciendo, donde
quiera que estás tus ojos siempre bañas, 20
y el llanto a tu dolor así responde,
que temo ver deshechas tus entrañas
en lágrimas, como al lluvioso viento
se derrite la nieve en las montañas.
Si acaso el trabajado pensamiento 25
en el común reposo se adormece,
por tornar al dolor con nuevo aliento,
en aquel breve sueño te aparece
la imagen amarilla del hermano,
que de la dulce vida desfallece; 30
y tú, tendiendo la piadosa mano,
probando a levantar el cuerpo amado,
levantas solamente el aire vano;
y del dolor el sueño desterrado
con ansia vas buscando, el que partido 35
era ya con el sueño y alongado.
Así desfalleciendo en tu sentido,
como fuera de ti, por la ribera
de Trápana con llanto y con gemido
el caro hermano buscas, que sola era 40
la mitad de tu alma, el cual muriendo,
no quedará ya tu alma entera.[253]
Y no de otra manera repitiendo
vas el amado nombre, en desusada
figura a todas partes revolviendo, 45
que cerca del Erídano aquejada,[254]
lloró y llamó Lampecie el nombre en vano,[255]
con la fraterna muerte lastimada:
«Ondas, tornadme ya mi dulce hermano
Faetón; si no, aquí veréis mi muerte, 50
regando con mis ojos este llano.»
¡Oh cuántas veces, con el dolor fuerte
avivadas las fuerzas, renovaba
las quejas de su cruda y dura suerte!
¡Y cuántas otras, cuando se acababa 55
aquel furor, en la ribera umbrosa,
muerta, cansada, el cuerpo reclinaba!
Bien te confieso que si alguna cosa
entre la humana puede y mortal gente
entristecer un alma generosa, 60
con gran razón podrá ser la presente,
pues te ha privado de un tan dulce amigo,
no solamente hermano, un acidente;
el cual, no solo siempre fue testigo
de tus consejos y íntimos secretos, 65
mas de cuanto lo fuiste tú contigo.
En él se reclinaban tus discretos
y honestos pareceres, y hacían
conformes al asiento sus efetos.
En él ya se mostraban y leían 70
tus gracias y virtudes una a una,
y con hermosa luz resplandecían,
como en luciente de cristal coluna,[256]
que no encubre de cuanto se avecina
a su viva pureza cosa alguna. 75
¡Oh, miserables hados! ¡Oh, mesquina
suerte la del estado humano, y dura,
do por tantos trabajos se camina!
Y agora muy mayor la desventura
de aquesta nuestra edad, cuyo progreso 80
muda de un mal en otro su figura.
¿A quién ya de nosotros el eceso
de guerras, de peligros y destierro
no toca, y no ha cansado el gran proceso?
¿Quién no vio desparcir su sangre al hierro 85
del enemigo? ¿Quién no vio su vida
perder mil veces y escapar por yerro?
¿De cuántos queda y quedará perdida
la casa y la mujer y la memoria,
y de otros la hacienda despendida? 90
¿Qué se saca de aquesto? ¿Alguna gloria?
¿Algunos premios o agradecimientos?
Sabralo quien leyere nuestra historia.
Verase allí que como polvo al viento,
así se deshará nuestra fatiga 95
ante quien se endereza nuestro intento.
No contenta con esto la enemiga
del humano linaje, que invidiosa
coge sin tiempo el grano de la espiga,
nos ha querido ser tan rigurosa, 100
que ni a tu juventud, don Bernaldino,
ni ha sido a nuestra pérdida piadosa.
¿Quién pudiera de tal ser adivino?
¿A quién no le engañara la esperanza,
viéndote caminar por tal camino? 105
¿Quién no se prometiera en abastanza[257]
seguridad entera de tus años,
sin temer de natura tal mudanza?
Nunca los tuyos, mas los propios daños,
dolernos deben; que la muerte amarga 110
nos muestra claros ya mil desengaños:
hanos mostrado ya que en vida larga
apenas de tormentos y de enojos
llevar podemos la pesada carga;
hanos mostrado en ti que claros ojos 115
y juventud y gracia y hermosura,[258]
son también, cuando quiere, sus despojos.
Mas no puede hacer que tu figura,
después de ser de vida ya privada,
no muestre el artificio de natura. 120
Bien es verdad que no está acompañada
de la color de rosa que solía
con la blanca azucena ser mesclada;
porque el calor templado que encendía
la blanca nieve de tu rostro puro, 125
robado ya la muerte te lo había.
En todo lo demás, como en seguro
y reposado sueño descansabas,
indicio dando del vivir futuro.[259]
Mas ¿qué hará la madre que tú amabas, 130
de quien perdidamente eras amado,
a quien la vida con la tuya dabas?
Aquí se me figura que ha llegado
de su lamento el son, que con su fuerza
rompe el aire vecino y apartado; 135
tras el cual a venir también se esfuerza
el de las cuatro hermanas, que teniendo
va con el de la madre viva fuerza.
A todas las contemplo desparciendo
de su cabello luengo el fino oro, 140
al cual ultraje y daño están haciendo.
El viejo Tormes con el blanco coro
de sus hermosas ninfas seca el río,
y humedece la tierra con su lloro.
No recostado en urna al dulce frío[260] 145
de su caverna umbrosa, mas tendido
por el arena en el ardiente estío,
con ronco son de llanto y de gemido,
los cabellos y barbas mal paradas
se despedaza, y el sutil vestido. 150
En torno dél sus ninfas, desmayadas,
llorando en tierra están sin ornamento,
con las cabezas de oro despeinadas.
Cese ya del dolor, el sentimiento,
hermosas moradoras del undoso 155
Tormes; tened más provechoso intento;
consolad a la madre, que el piadoso
dolor la tiene puesta en tal estado,
que es menester socorro presuroso.
Presto será que el cuerpo, sepultado 160
en un perpetuo mármol, de las ondas
podrá de vuestro Tormes ser bañado.
Y tú, hermoso coro, allá en las hondas
aguas metido, podrá ser que al llanto
de mi dolor te muevas y respondas. 165
Vos, altos promontorios, entre tanto
con toda la Trinacria entristecida[261]
buscad alivio en desconsuelo tanto.
Sátiros, faunos, ninfas, cuya vida[262]
sin enojos se pasa, moradores 170
de la parte repuesta y escondida,
con luenga esperiencia sabidores,
buscad para consuelo de Fernando
hierbas de propriedad oculta y flores;
así en el escondido bosque, cuando 175
ardiendo en vivo y agradable fuego
las fugitivas ninfas vais buscando,
ellas se inclinen al piadoso ruego,
y en recíproco lazo estén ligadas,
sin esquivar el amoroso juego. 180
Tú, gran Fernando, que entre tus pasadas
y tus presentes obras resplandeces,
y a mayor fama están por ti obligadas,
contempla dónde estás; que si falleces
al nombre que has ganado entre la gente, 185
de tu virtud en algo te enflaqueces.
Porque al fuerte varón no se consiente
no resistir los casos de fortuna
con firme rostro y corazón valiente.
Y no tan solamente esta importuna, 190
con proceso cruel y riguroso,
con revolver de sol, de cielo y luna
mover no debe un pecho generoso,
ni entristecello con funesto vuelo,
turbando con molestia su reposo; 195
mas si toda la máquina del cielo
con espantable son y con ruído,
hecha pedazos, se viniere al suelo,
debe ser aterrado y oprimido
del grave peso y de la gran ruína, 200
primero que espantado y comovido.
Por estas asperezas se camina
de la inmortalidad al alto asiento,
do nunca arriba quien de aquí declina.
En fin, Señor, tornando al movimiento 205
de la humana natura, bien permito
a nuestra flaca parte un sentimiento;
mas el eceso en esto vedo y quito,
si alguna cosa puedo, que parece
que quiere proceder en infinito. 210
A lo menos el tiempo que, descrece
y muda de las cosas el estado,
debe bastar, si la razón fallece.
No fue el troyano príncipe llorado[263]
siempre del viejo padre dolorido, 215
ni siempre de la madre lamentado;
antes, después del cuerpo redemido
con lágrimas humildes y con oro,
que fue del fiero Aquiles concedido,
y reprimido el lamentable coro 220
del frigio llanto, dieron fin al vano
y sin provecho sentimiento y lloro.
El tierno pecho, en esta parte humano,
de Venus, ¿qué sintió, su Adonis viendo
de su sangre regar el verde llano?[264] 225
Mas des que vido bien que corrompiendo
con lágrimas sus ojos no hacía
sino en su llanto estarse deshaciendo,
y que tornar llorando no podía
su caro y dulce amigo de la escura 230
y tenebrosa noche al claro día,
los ojos enjugó, y la frente pura
mostró con algo más contentamiento,
dejando con el muerto la tristura;
y luego con gracioso movimiento 235
se fue su paso por el verde suelo,
con su guirnalda usada y su ornamento.
Desordenaba con lacivo vuelo
el viento su cabello, y con su vista
alegraba la tierra, el mar y el cielo. 240
Con discurso y razón que es tan prevista,
con fortaleza y ser que en ti contemplo,
a la flaca tristeza se resista.
Tu ardiente gana de subir al templo
donde la muerte pierde su derecho, 245
te baste, sin mostrarte yo otro ejemplo.
Allí verás cuán poco mal ha hecho
la muerte en la memoria y clara fama
de los famosos hombres que ha deshecho.
Vuelve los ojos donde al fin te llama 250
la suprema esperanza, do perfeta
sube y purgada el alma en pura llama.
¿Piensas que es otro el fuego que en Oeta[265]
de Alcides consumió la mortal parte[266]
cuando voló el espirtu al alta meta? 255
Desta manera aquel por quien reparte
tu corazón sospiros mil al día,
y resuena tu llanto en cada parte,
subió por la difícil y alta vía,
de la carne mortal purgado y puro, 260
en la dulce región del alegría;
do con discurso libre ya y seguro
mira la vanidad de los mortales,
ciegos, errados en el aire escuro;
y viendo y contemplando nuestros males, 265
alégrase de haber alzado el vuelo
a gozar de las horas inmortales.
Pisa el inmenso y cristalino cielo
teniendo puestos de una y otra mano
el claro padre y el sublime abuelo.[267] 270
El uno ve de su proceso humano
sus virtudes estar allí presentes,
que el áspero camino hacen llano;
el otro, que acá hizo entre las gentes
en la vida mortal menor tardanza, 275
sus llagas muestra allá resplandecientes.
Dellas aqueste premio allá se alcanza;
porque del enemigo no conviene
procurar en el cielo otra venganza.
Mira la tierra, el mar que la contiene,[268] 280
todo lo cual por un pequeño punto
a respeto del cielo juzga y tiene.
Puesta la vista en aquel gran trasunto
y espejo, do se muestra lo pasado
con lo futuro y lo presente junto, 285
el tiempo que a tu vida limitado
de allá arriba te está, Fernando, mira,
y allí ve tu lugar ya deputado.
¡Oh bienaventurado! que sin ira,
sin odio, en paz estás, sin amor ciego, 290
con quien acá se muere y se sospira;
y en eterna holganza y en sosiego
vives, y vivirás cuanto encendiere
las almas del divino amor el fuego!
Si el cielo piadoso y largo diere 295
luenga vida a la voz deste mi llanto,
lo cual tú sabes que pretende y quiere,
yo te prometo, amigo, que entre tanto
que el sol al mundo alumbre, y que la escura
noche cubra la tierra con su manto, 300
y en tanto que los peces la hondura
húmida habitarán del mar profundo,
y las fieras del monte la espesura,
se cantará de ti por todo el mundo;
que en cuanto se discurre, nunca visto 305
de tus años jamás otro segundo
será desde el Antártico a Calisto.[269]
ELEGÍA SEGUNDA
Aquí, Boscán, donde del buen troyano[270]

Anquises con eterno nombre y vida[271]
conserva la ceniza el Mantuano,[272]
debajo de la seña esclarecida
de César Africano nos hallamos,[273] 5
la vencedora gente recogida;
diversos en estudio; que unos vamos
muriendo por coger de la fatiga
el fruto que con el sudor sembramos;
otros, que hacen la virtud amiga 10
y premio de sus obras, y así quieren
que la gente lo piense y que lo diga,
destotros en lo público difieren,
y en lo secreto sabe Dios en cuánto
se contradicen en lo que profieren. 15
Yo voy por medio, porque nunca tanto
quise obligarme a procurar hacienda;
que un poco más que aquellos me levanto.
Ni voy tampoco por la estrecha senda
de los que cierto sé que a la otra vía 20
vuelven de noche, al caminar, la rienda.
Mas, ¿dónde me llevó la pluma mía,
que a sátira me voy mi paso a paso,[274]
y aquesta que os escribo es elegía?
Yo enderezo, señor, en fin, mi paso 25
por donde vos sabéis, que su proceso
siempre ha llevado y lleva Garcilaso;[275]
y así, en mitad de aqueste monte espeso
de las diversidades me sostengo,
no sin dificultad, mas no por eso 30
dejo las musas, antes torno y vengo
dellas al negociar, y variando,
con ellas dulcemente me entretengo.
Así se van las horas engañando,
así del duro afán y grave pena 35
estamos algún hora descansando.
De aquí iremos a ver de la sirena
la patria, que bien muestra haber ya sido[276]
de ocio y de amor antiguamente llena.[277]
Allí mi corazón tuvo su nido 40
un tiempo ya; mas no sé ¡triste! agora
o si estará ocupado o desparcido.[278]
De aquesto un frío temor así a deshora
por mis huesos discurre en tal manera,
que no puedo vivir con él un hora. 45
Si ¡triste! de mi bien estado hubiera
un breve tiempo ausente, yo no niego
que con mayor seguridad viviera.
La breve ausencia hace el mismo juego
en la fragua de amor, que en fragua ardiente 50
el agua moderada hace al fuego;
la cual verás que no tan solamente
no lo suele matar, mas lo refuerza
con ardor más intenso y eminente;
porque un contrario con la poca fuerza 55
de su contrario, por vencer la lucha,
su brazo aviva y su valor esfuerza;
pero si el agua en abundancia mucha
sobre el fuego se esparce y se derrama,
el humo sube al cielo, el son se escucha, 60
y el claro resplandor de viva llama,
en polvo y en ceniza convertido,
apenas queda dél sino la fama.
Así el ausencia larga, que ha esparcido
en abundancia su licor, que amata 65
el fuego que el amor tenía encendido,
de tal suerte lo deja, que lo trata
la mano sin peligro en el momento
que en aparencia y son se desbarata.
Yo solo fuera voy de aqueste cuento; 70
porque el amor me aflige y me atormenta,
y en el ausencia crece el mal que siento;
y pienso yo que la razón consienta
y permita la causa deste efeto,
que a mí solo entre todos se presenta; 75
porque, como del cielo yo sujeto
estaba eternamente y deputado
al amoroso fuego en que me meto,
así para poder ser amatado,
el ausencia sin término infinita 80
debe ser, y sin tiempo limitado;
lo cual no habrá razón que lo permita;
porque, por más y más que ausencia dure,
con la vida se acaba, que es finita.
Mas a mí ¿quién habrá que me asegure 85
que mi mala fortuna con mudanza
y olvido contra mí no se conjure?
Este temor persigue la esperanza
y oprime y enflaquece el gran deseo
con que mis ojos van de su holganza.[279] 90
Con ellos solamente agora veo
este dolor que el corazón me parte,
y con él y comigo aquí peleo.
¡Oh crudo, oh riguroso, oh fiero Marte,
de túnica cubierto de diamante,[280] 95
y endurecido siempre en toda parte!
¿Qué tiene que hacer el tierno amante
con tu dureza y áspero ejercicio
llevado siempre del furor delante?
Ejercitando, por mi mal, tu oficio, 100
soy reducido a términos que muerte
será mi postrimero beneficio.[281]
Y esta no permitió mi dura suerte
que me sobreviniese peleando,
de hierro traspasado agudo y fuerte,[282] 105
por que me consumiese contemplando
mi amado y dulce fruto en mano ajena,
y el duro posesor de mí burlando.
Mas, ¿dónde me trasporta y enajena
de mi proprio sentido el triste miedo? 110
Aparte de vergüenza y dolor llena,
donde si el mal yo viese, ya no puedo,
según con esperalle estoy perdido,
acrecentar en la miseria un dedo.
Así lo pienso agora, y si él venido 115
fuese en su misma forma y su figura,
tendría el presente por mejor partido,
y agradecería siempre a la ventura
mostrarme de mi mal solo el retrato,
que pintan mi temor y mi tristura. 120
Yo sé qué cosa es esperar un rato
el bien del propio engaño, y solamente
tener con él inteligencia y trato.
Como acontece al mísero doliente,
que del un cabo el cierto amigo y sano 125
le muestra el grave mal de su acidente,
y le amonesta que del cuerpo humano
comience a levantar a mejor parte
el alma suelta con volar liviano;
mas la tierna mujer, de la otra parte, 130
no se puede entregar a desengaño,
y encúbrele del mal la mayor parte;
él, abrazado con su dulce engaño,
vuelve los ojos a la voz piadosa,
y alégrase muriendo con su daño, 135
así los quito yo de toda cosa,
y póngolos en solo el pensamiento
de la esperanza cierta o mentirosa.
En este dulce error muero contento;
porque ver claro y conocer mi estado 140
no puede ya curar el mal que siento;
y acabo como aquel que en un templado
baño metido, sin sentido muere,
las venas dulcemente desatado.[283]
Tú, que en la patria entre quien bien te quiere 145
la deleitosa playa estás mirando,[284]
y oyendo el son del mar que en ella hiere,
y sin impedimento contemplando
la misma a quien tú vas eterna fama,
en tus vivos escritos, procurando; 150
alégrate, que más hermosa llama[285]
que aquella que el troyano encendimiento
pudo causar, el corazón te inflama.
No tienes que temer el movimiento
de la fortuna con soplar contrario, 155
que el puro resplandor serena el viento.
Yo, como conducido mercenario,
voy do fortuna a mi pesar me envía,
si no a morir, que aquesto es voluntario.
Solo sostiene la esperanza mía 160
un tan débil engaño, que de nuevo
es menester hacello cada día;
y si no lo fabrico y lo renuevo,
da consigo en el suelo mi esperanza;
tanto, que en vano a levantalla pruebo. 165
Aqueste premio mi servir alcanza,
que en sola la miseria de mi vida
negó fortuna su común mudanza.
¿Dónde podré huir que sacudida
un rato sea de mí la grave carga 170
que oprime mi cerviz enflaquecida?
Mas ¡ay! que la distancia no descarga
el triste corazón, y el mal, doquiera
que estoy, para alcanzarme el vuelo alarga.
Si donde el sol ardiente reverbera 175
en la arenosa Libia, engendradora
de toda cosa ponzoñosa y fiera;
o adonde es él vencido a cualquiera hora
de la rígida nieve y viento frío,
parte do no se vive ni se mora; 180
si en esta o en aquella el desvarío
o la fortuna me llevase un día,
y allí gastase todo el tiempo mío;
el celoso temor con mano fría
en medio del calor y ardiente arena 185
el triste corazón me apretaría;
y en el rigor del hielo, en la serena
noche, soplando el viento agudo y puro,
que el veloce correr del agua enfrena,
de aqueste vivo fuego en que me apuro 190
y consumirme poco a poco espero,
sé que aun allí no podré estar seguro;
y así, diverso entre contrarios muero.
EPÍSTOLA
Señor Boscán, quien tanto gusto tiene[286]

de daros cuenta de los pensamientos
hasta en las cosas que no tienen nombre,
no le podrá con vos faltar materia,
ni será menester buscar estilo 5
presto, distinto, de ornamento puro,[287]
tal cual a culta epístola conviene.
Entre muy grandes bienes que consigo
el amistad perfeta nos concede,
es aqueste descuido suelto y puro, 10
lejos de la curiosa pesadumbre;
y así, de aquesta libertad gozando,
digo que vine, cuanto a lo primero,
tan sano como aquel que en doce días
lo que solo veréis ha caminado 15
cuando el fin de la carta os lo mostrare.[288]
Alargo y suelto a su placer la rienda,
mucho más que al caballo, al pensamiento,
y llévame a las veces por camino
tan dulce y agradable, que me hace 20
olvidar el trabajo del pasado.
Otras me lleva por tan duros pasos,
que con la fuerza del afán presente,
también de los pasados se me olvida.
A veces sigo un agradable medio 25
honesto y reposado en que el discurso
del gusto y del ingenio se ejercita.
Iba pensando y discurriendo un día

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Answers to End-of-Chapter Discussion Questions

After the tax

The equilibrium: P = $2.50 per bushel when Q = 10 billion bushels.

Step 3: Calculating new market equilibrium with the tax.

Government collects = $14.70 billion.

AS = CS + PS + Government collection = $31.85 billion.

Step 5: Calculating the deadweight loss with the tax.

For Worked-Out Problem 15.1: A = $20.25, B = $6.30, C = $8.10, D = $0.35.

New CS = (0.5)(8 – 2.70)(11) = $30.25 billion.

New PS = (0.5)(2 – 0.50)(11) = $12.10 billion.

Cost of the subsidy to the government = –(0.70)(11) = $7.70 billion.

New AS = New CS + New PS – Cost to government = 34.65 billion.

Voluntary production reduction program:

A = $20.25, B = $4.50, C = $0.25, D = $9.90, E = $0.10, F = $9.28, and G = $0.88. The

No Price floor Price Production Voluntary

Qd = 65,800 – 1,200P =4,000P – 20,000 = Qs

Change in consumer surplus -$2.48 billion

Compute quantities demanded and supplied at the price of P = $1.40:

Computing the areas of the triangles in the figure.

Change in CS = –(B + C) = –$2.48 billion.

Change in PS = B + C + G = $2.65 billion.

Change in government revenue = –(C + E + F + G) = –$3.61 billion.

Change in AS = –(C + E + F) = –$3.44 billion.

Qd = 65,800 – 1,200P =4,000P – 20,000 = Qs

The welfare effect of a tariff of $0.50 per bushel

With the tariff, the price rises by $0.50.

b. Change in producer surplus: –(A + B).

c. Change in government revenue: –(B + C + D + E + F).

d. Change in aggregate surplus: –(B + F).

Answers to Calculus Problems

[R/(B + R)] is the derivative of the equilibrium price with respect to T.

Set Qs+T = Qd.

Solving for P gives:

b. The competitive equilibrium price of X is now $2 and the competitive equilibrium

Every widget producer’s technology has cost function

The market demand function for widgets is

Suppose the government is considering a $6 subsidy per widget sold (given to

b. Competitive price = $26

c. Deadweight loss = $1,800

b. With the subsidy, the new cost function will be:

Flérida, para mí dulce y sabrosa 305

Hermosa Filis, siempre yo te sea

Cual suele acompañada de su bando

¿Ves el furor del animoso viento,

El blanco trigo multiplica y crece,

De la esterilidad es oprimido 345

El álamo de Alcides escogido

El fresno por la selva en hermosura

Esto cantó Tirreno, y esto Alcino

Aunque este grave caso haya tocado[251]

Aquí, Boscán, donde del buen troyano[270]

Señor Boscán, quien tanto gusto tiene[286]

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