The market supply and demand for a product are shown in the diagram below.PRICE $6 SupplyDemand 80 200 QUANTITY(a) Is the price elasticity of supply less than one, equal to one, or greater than one? Explain. (b) Calculate consumer surplus at the equilibrium price. Show your work. (C) Now suppose the government imposes a per-unit tax of $1 on producers. (i) What happens to total revenue received by producers after they pay the tax to the government? Explain. (ii) Will producer surplus increase, decrease, or stay the same? (iii) Will total surplus increase, decrease, or stay the same? Explain. 3. The market supply and demand for a product are shown in the diagram below.$10$6SupplyDemand80200 QUANTITY(a) Is the price elasticity of supply less than one, equal to one, or greater than one? Explain.(b) Calculate consumer surplus at the equilibrium price. Show your work.(c) Now suppose the govermment imposes a per-unit tax of $1 on producers.(i) What happens to total revenue received by producers after they pay the tax to the government?Explain.(ii) Will producer surplus increase, decrease, or stay the same?(iii) Will total surplus increase, decrease, or stay the same? Explain.PRICE

a) The price elasticity of supply is a horizontal curve meaning it is perfectly elastic.

Answered: 3. The market supply and demand for a…

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Consumers, Producers, And The Efficiency Of Markets

Section: Chapter Questions

Problem 9PA

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The market supply and demand for a product are shown in the diagram below.

PRICE $6 Supply

Demand 80 200 QUANTITY

(a) Is the price elasticity of supply less than one, equal to one, or greater than one? Explain. (b) Calculate consumer surplus at the equilibrium price. Show your work. (C) Now suppose the government imposes a per-unit tax of $1 on producers. (i) What happens to total revenue received by producers after they pay the tax to the government? Explain. (ii) Will producer surplus increase, decrease, or stay the same? (iii) Will total surplus increase, decrease, or stay the same? Explain.

Definition Video Definition Point where the demand and supply curves intersect. At the equilibrium price the quantity supplied of a good is equal to the quantity demanded. When the market is not in equilibrium, market surplus or market shortage occurs. The region that is above the price equilibrium indicates market surplus and the region below the price equilibrium indicates market shortage. Video

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