The marginal value schedule for Moe and the marginal cost schedule for Larry for apples are shown below.
No. of Apples Moe's MV Larry's MC
1 $10 $1
2 7 2
3 5 4
4 3 5
(a) Find a single price that all mutually preferred trades can occur.
(b) What are the gains from trade?
(c) Now suppose a $1.50 per-unit tax is levied on Larry for each unit sold (that raises MC by $1.50). Now find all mutually preferred trades and the trading prices. Is the demander harmed by a tax levied on the supplier? Explain.