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Suppose the government imposes an excise tax on designer handbags. The black line on the following graph shows the tax wedge created by a tax of $80 per handbag. 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 surplus after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss. PRICE (Dollars per handbag) 400 360 320 280 240 200 160 120 80 40 0 Demand Tax Wedge After Tax 0 100 200 300 400 500 600 700 800 900 1000 QUANTITY (Handbags) Consumer Surplus Producer Surplus Supply Tax Revenue Deadweight Loss 0 Tax Revenue After Tax (Dollars) A 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 (Dollars) Consumer Surplus Producer Surplus Deadweight Loss

Suppose the government imposes an excise tax on designer handbags. The black line on the following graph shows the tax wedge created by a tax of $80 per handbag. 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 surplus after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss. PRICE (Dollars per handbag) 400 360 320 280 240 200 160 120 80 40 0 Demand Tax Wedge After Tax 0 100 200 300 400 500 600 700 800 900 1000 QUANTITY (Handbags) Consumer Surplus Producer Surplus Supply Tax Revenue Deadweight Loss 0 Tax Revenue After Tax (Dollars) A 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 (Dollars) Consumer Surplus Producer Surplus Deadweight Loss

Principles of Macroeconomics (MindTap Course List)
Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781305971509
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter7: Consumers, Producers, And The Efficiency Of Markets
Section: Chapter Questions
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Suppose the government imposes an excise tax on designer handbags. The black line on the following graph shows the tax wedge created by a tax of $80 per handbag. 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 surplus after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss. PRICE (Dollars per handbag) 400 360 320 280 240 200 160 120 80 40 0 Demand Tax Wedge After Tax 0 100 200 300 400 500 600 700 800 900 1000 QUANTITY (Handbags) Consumer Surplus Producer Surplus Supply Tax Revenue Deadweight Loss 0 Tax Revenue After Tax (Dollars) A 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 (Dollars) Consumer Surplus Producer Surplus Deadweight Loss
Transcribed Image Text:Suppose the government imposes an excise tax on designer handbags. The black line on the following graph shows the tax wedge created by a tax of $80 per handbag. 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 surplus after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss. PRICE (Dollars per handbag) 400 360 320 280 240 200 160 120 80 40 0 Demand Tax Wedge After Tax 0 100 200 300 400 500 600 700 800 900 1000 QUANTITY (Handbags) Consumer Surplus Producer Surplus Supply Tax Revenue Deadweight Loss 0 Tax Revenue After Tax (Dollars) A 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 (Dollars) Consumer Surplus Producer Surplus Deadweight Loss
2. Taxes and welfare Consider the market for designer handbags. The following graph shows the demand and supply for designer handbags before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of designer handbags 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. PRICE (Dollars per handbag) 400 360 320 280 240 200 160 120 80 40 0 0 Demand Before Tax Supply 100 200 300 400 500 600 700 800 900 QUANTITY (Handbags) 1000 + Equilibrium A Consumer Surplus Producer Surplus
Transcribed Image Text:2. Taxes and welfare Consider the market for designer handbags. The following graph shows the demand and supply for designer handbags before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of designer handbags 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. PRICE (Dollars per handbag) 400 360 320 280 240 200 160 120 80 40 0 0 Demand Before Tax Supply 100 200 300 400 500 600 700 800 900 QUANTITY (Handbags) 1000 + Equilibrium A Consumer Surplus Producer Surplus
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