Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Question
Chapter 7, Problem 6QE
(a)
To determine
Illustrate the
(b)
To determine
Determine the
(c)
To determine
Determine the consumer surplus when the market is in equilibrium before and after tax.
(c)
To determine
Determine the tax revenue after the tax implemented.
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Suppose the vertical distance between points S and R represents a tax in the market. Please answer the questions under the case of the tax. What area is the tax revenue to the government? What is the amount of the tax revenue? What area is the consumer surplus represented by? What is the amount of consumer surplus? What area is the producer surplus represented by? What is the amount of producer surplus? What area is the deadweight loss represented by? What is the amount of deadweight loss? What is the buyers’ share of tax burden? What is the sellers’ share of tax burden?
Consider the market for mountain bikes .The following graph shows the demand and supply for mountain bikes before the government imposes any taxes
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 dead weight loss after tax .
Note : you can determine the areas of different portions of the graphs by selecting the relevant area
Consumer surplus before tax and after tax :
Producer surplus before and after tax :
Tax revenue after tax :
Deadweight loss after tax :
Suppose that the government imposes a tax on cigarettes, use the diagram below to answer the questions. D is the demand curve before tax, S is the supply curve before tax and ST is the supply curve after the tax.
For the market without the tax. Indicate
(iv) buyer's reservation price
(v) sellers reservation price
(b) Calculate the consumer surplus before the tax.
(c) calculate the producer surplus before the tax.
Chapter 7 Solutions
Microeconomics
Ch. 7.1 - Prob. 1QCh. 7.1 - Prob. 2QCh. 7.1 - Prob. 3QCh. 7.1 - Prob. 4QCh. 7.1 - Prob. 5QCh. 7.1 - Prob. 6QCh. 7.1 - Prob. 7QCh. 7.1 - Prob. 8QCh. 7.1 - Prob. 9QCh. 7.1 - Prob. 10Q
Ch. 7 - Prob. 1QECh. 7 - Prob. 2QECh. 7 - How is elasticity related to the revenue from a...Ch. 7 - Prob. 4QECh. 7 - Prob. 5QECh. 7 - Prob. 6QECh. 7 - Prob. 7QECh. 7 - Prob. 8QECh. 7 - Prob. 9QECh. 7 - Prob. 10QECh. 7 - Prob. 11QECh. 7 - Prob. 12QECh. 7 - Prob. 13QECh. 7 - Prob. 14QECh. 7 - Prob. 15QECh. 7 - Prob. 16QECh. 7 - Prob. 17QECh. 7 - Prob. 18QECh. 7 - Prob. 19QECh. 7 - Prob. 20QECh. 7 - Prob. 21QECh. 7 - Prob. 22QECh. 7 - Prob. 1QAPCh. 7 - Prob. 2QAPCh. 7 - Prob. 3QAPCh. 7 - Prob. 4QAPCh. 7 - Prob. 5QAPCh. 7 - Prob. 1IPCh. 7 - Prob. 2IPCh. 7 - Prob. 3IPCh. 7 - Prob. 4IPCh. 7 - Prob. 5IPCh. 7 - Prob. 6IP
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- 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?arrow_forwardSuppose that the government imposes a tax on cigarettes, use the diagram below to answer the questions. D is the demand curve before tax, S is the supply curve before tax and ST is the supply curve after the tax. For the market without the tax. Indicate (I)price paid by consumers (Ii) price paid by producers (iii) quantity of cigarettes sold (iv) buyer's reservation price (v) sellers reservation price (b) Calculate the consumer surplus before the tax. (c) calculate the producer surplus before the tax. (d) For the market for cigarettes with the tax, calculate (I) the tax (ii) price paid by consumers (iii) price recieved by producers (iv) quantity of cigarettes sold (e) (I) Calculate the consumer surplus after the tax. (ii) calculate the producer surplus after the tax. (iii) the tax revenue (iv) deadweight loss (v) total surplus after taxarrow_forwardusing the graph answer the following questions: 19. what is the size of consumer surplus when a price ceiling of $5 is imposed? 20. what is the size of producer surplus when a price ceiling of $5 is imposed 21. what is the size of deadweight loss from a price ceiling of $5arrow_forward
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