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7) What price would clear this market after the tax is imposed? 8) What is the total surplus possible in the market after the tax is imposed?

7) What price would clear this market after the tax is imposed? 8) What is the total surplus possible in the market after the tax is imposed?

Economics For Today
Economics For Today
10th Edition
ISBN:9781337613040
Author:Tucker
Publisher:Tucker
Chapter14: Environmental Economics
Section: Chapter Questions
Problem 8SQ
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Consumer & Producer Surplus Price There are four consumers willing to pay (WTP) the following amounts for haircuts: Gloria: $35 Jack: $10 Claire: $40 Phil: $25 There are four haircutting businesses that have the capacity to produce only one haircut with the following costs: Firm A: $15 Firm B: $30 Firm C: $20 Firm D: $10 50 40 30 20 10 0 1 2 3 4 5 ECON 613 Name: Quantity 1) To achieve efficiency, how many haircuts should be given? 3 A. C. & D 2) Which business should cut hair and which consumers should have their hair cut? Phil, Gloria and Claire 3) What is the largest consumer surplus that Claire could earn in this market? 4) How large is the maximum possible total surplus? 5) What price could result in the maximum total surplus? 6) Suppose that a tax of $10 per haircut is imposed on the businesses in this market. How many haircuts would be given now? 7) What price would clear this market after the tax is imposed? 8) What is the total surplus possible in the market after the tax is imposed? 9) What is the deadweight loss caused by the imposition of the tax? 10) What "price floor" could produce the same result as the $10 tax per haircut above? $65 total 55-30= $25 $30
Transcribed Image Text:Consumer & Producer Surplus Price There are four consumers willing to pay (WTP) the following amounts for haircuts: Gloria: $35 Jack: $10 Claire: $40 Phil: $25 There are four haircutting businesses that have the capacity to produce only one haircut with the following costs: Firm A: $15 Firm B: $30 Firm C: $20 Firm D: $10 50 40 30 20 10 0 1 2 3 4 5 ECON 613 Name: Quantity 1) To achieve efficiency, how many haircuts should be given? 3 A. C. & D 2) Which business should cut hair and which consumers should have their hair cut? Phil, Gloria and Claire 3) What is the largest consumer surplus that Claire could earn in this market? 4) How large is the maximum possible total surplus? 5) What price could result in the maximum total surplus? 6) Suppose that a tax of $10 per haircut is imposed on the businesses in this market. How many haircuts would be given now? 7) What price would clear this market after the tax is imposed? 8) What is the total surplus possible in the market after the tax is imposed? 9) What is the deadweight loss caused by the imposition of the tax? 10) What "price floor" could produce the same result as the $10 tax per haircut above? $65 total 55-30= $25 $30
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