Upon hearing your good work in preparing a policy memo on soda taxes for the City of Chicago, NYC Ma… Show more Upon hearing your good work in preparing a policy memo on soda taxes for the City of Chicago, NYC Mayor Bloomberg has hired you to prepare a policy memo on the impact of a tax on sugar-sweetened beverages using the following information collected by his staff: Supply: Q = P – 2 Demand: Q = 24 – P Marginal External Costs: MEC = 0.5Q Where Q is measured in millions of cases of sugar-sweetened beverages and P is the price per case. Recall, supply is the inverse of MPC and demand is the inverse of MPB a) Provide an economic rationale for a tax on sugar-sweetened beverages including why we are concerned about consumption of soda and the evidence to support this concern. Make sure to address external costs of soda (and explain what that means) and a brief description of how these external costs could be monetized. b) Calculate the optimal tax and explain intuitively how you did so and how it would lead to a socially desired outcome c) Use your calculation for the table below to describe the effects of the tax and to briefly explain who might oppose such a tax. d) Qualify your results by explaining how a sugar-sweetened beverage tax alone may not reduce obesity as much as desired. e) Include the following table to show how the tax would affect consumers, producers, externality costs, net social benefits and private deadweight loss. • Show less