Consider the market for designer purses. The following graph shows the demand and supply for designer purses before the government imposes any taxes First, use the black point (plus symbol) to indicate the equilibrium price and quantity of designer purses in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple poinit (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. Before Tax 150 135 Equilbrium 120 Demand 90 Consumer Surplus Producer Surplus Supply 45 20 4 s 100 120 340 100 160 200 (end ed oal 3d
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- Consider the market for mountain bikes. The following graph shows the demand and supply for mountain bikes before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of mountain bikes in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. (screen shot 1) Suppose the government imposes an excise tax on mountain bikes. The black line on the following graph shows the tax wedge created by a tax of $80 per bike. First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade the area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area…Consider the market for commercial fans. The following graph shows the demand and supply for commercial fans before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of commercial fans in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. Suppose the government imposes an excise tax on commercial fans. The black line on the following graph shows the tax wedge created by a tax of $50 per fan. First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade the area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representing total producer…Congress and the president decide that the United States should reduce air pollution by reducing its use of gasoline. They impose a $0.50 tax on each gallon of gasoline sold. Suppose they decided to impose the tax on consumers. In the following graph, shows the effect of a $0.50 tax on each gallon of gasoline sold imposed on consumers by shifting the demand or supply curve. DemandSupply01234563.02.52.01.51.00.50Price of Gasoline (Dollars per gallon)Quantity of Gasoline (Thousands of gallons)Demand Supply True or False: The effect of the tax will be the same regardless of whom the tax is imposed on. True False This tax would be more effective in reducing the quantity of gasoline consumed if the demand for gasoline were elastic. True or False: Consumers of gasoline are helped by this tax. True False Workers in the oil industry are by this tax.
- Using the following diagram (the equilibrium quantity is 5.5, the supply curve intersects the price axis at 3.5), answer these questions: a) If a tax of $2 were imposed, what price would buyers pay, and what price would suppliers receive? How much revenue would be raised by the tax? Compute the total consumer surplus, producer surplus, and welfare after the introduction of the tax. b) If a subsidy of $5 were imposed, what price would buyers pay, and what price would suppliers receive? How much would the subsidy cost the government? What would be the consumer surplus and the producer surplus? c) If the government imposed a binding price floor of $7 and compensated the producers by buying the excess surplus at the stated price: What would be the consumer surplus, the producer surplus, the government expenditures, and total welfare?This chapter analyzed the welfare effects of a tax on a good. Consider now the opposite policy. Suppose that the government subsidizes a good. For each unit of the goods sold, the government pays $2 to the buyer. A) Use the black point (plus symbol) to indicate the initial equilibrium in this market before the subsidy. Then use the green point (triangle symbol) to shade the area representing consumer surplus, and use the purple point (diamond symbol) to shade the area representing producer surplus. B) On the following graph, use the tan segment (dash symbols) to indicate the wedge formed between the price received by producers and the price consumers pay out of their own pocket. (Hint: Find the quantity to the right of the initial equilibrium where the difference between the supply and demand curves is $2.) Next use the black point (plus symbol) to indicate the price producers receive at that quantity, and use the grey point (star symbol) to indicate the price consumers…Consider the market for commercial fans. The following graph shows the demand and supply for commercial fans before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of commercial fans in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax, and consumer surplus, producer surplus, tax revenue, and deadweight loss after the tax. Note: You can determine the areas of different portions of the graph by selecting the relevant area. Before Tax After Tax (Dollars) (Dollars) Before Tax (Dollars)…
- Consider the market for designer purses. The following graph shows the demand and supply for designer purses before the government imposes any taxes.The following graph shows the market for the long-distance bus rides. In the absence of taxes, the equilibrium price of a ride is $5 and the equilibrium quantity is 10 million rides. Suppose that regulator levies an excise tax on bus service providers. The amount of excise tax equals $2 per ride. Calculate the amount of dead-weight loss resulting from this tax. $4 million $0.5 million $1 million $2 millionThe following table is to be used for answering questions 9-12. Price per dozen Dozens of doughnuts Dozens of doughnuts demanded supplied $5.00 12,000 24,000 4.25 15,000 21,000 3.50 18,000 18,000 2.75 21,000 15,000 2.00 25,000 10,000 9. What is the equilibrium price? What is the equilibrium quantity? 10. Suppose that a tax of $1.50 per dozen is levied by the government on producers. What is the new equilibrium quantity? What is the new equilibrium price? 11. Suppose, instead, that a…
- Suppose a tax is levied in the market for soda. Consider a $0.50 excise tax on producers for each soda sold. The graph illustrates the demand and supply curves for soda both before and after the tax is levied. Use the graph below to answer the remaining parts of this question. d. What is the consumer surplus generated after the imposition of the tax? Shade in this area on the graph. Instructions: Use the tool provided “CStax” to illustrate this area on the graph. Consumer surplus after the imposition of the tax is $ thousand. e. What is the producer surplus generated after the imposition of the tax? Shade in this area on the graph. Instructions: Use the tool provided “PStax” to illustrate this area on the graph. Producer surplus after the imposition of the tax is $ thousand. f. What is the total revenue generated from the tax? Shade in this area on the graph. Instructions: Use the tool provided “TR” to illustrate this area on the graph. Tax…The government is in need of tax revenue and has narrowed down the choice of markets to tax to two: cigarettes or t-shirts. The markets are summarised below. Cigarettes Demand: P = 100 – 4Q Supply: P = Q T-shirts Demand: P = 35 – ½Q Supply: P = 5 + ½Q Graph the two markets and calculate the equilibrium price and quantity. If the government implemented a $5 tax on each market, how much tax revenue could each market generate? If you were an economic advisor, which market would you suggest taxing and why?The following graph depicts a market where a tax has been imposed. Pe was the equilibrium price before the tax was imposed, and Qe was the equilibrium quantity. After the tax, PC is the price that consumers pay, and PS is the price that producers receive. QT units are sold after the tax is imposed. NOTE: The areas B and C are rectangles that are divided by the supply curve ST. Include both sections of those rectangles when choosing your answers. What is the amount of the tax, as measured along the y axis? PC + PS Pe – PS PC – PS PC – P* Pe + PS