Refer to Figure 22.2 below. Suppose that the supply of land is constant at L acres, and Price per acre is $400. In addition, the before-tax demand for land can be characterized by the equation P = 500 - 2L, where L is the acres of land and P is the price.

(A) What is the constant supply of land (L) in the market?

(B) If the after-tax demand curve, P , can be written as P = 400 - 4L, what is P , and how

much tax revenue is generated?

(A) If the price is 400, then the constant acres of land will be 400 = 500 - 2(L), L* = 50.
(B) At the same quantity of 50, the after-tax price will be 400 - 4(50) = 200. Tax revenue will be
[(400 - 200) * 50] = 1,000.