EBK EXPLORING MACROECONOMICS
7th Edition
ISBN: 9780100546400
Author: Sexton
Publisher: YUZU
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Question
Chapter 7, Problem 9P
To determine
(a)
The area of consumer surplus and
To determine
(b)
The area of consumer surplus and producer surplus if the $T tax is imposed.
To determine
(c)
The deadweight cost of the tax.
To determine
(d)
The tax revenue which is raised from the tax.
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The graph accompanying this question shows a market in which the government has imposed an excise tax of $60 on producers.
(a) What quantity will be sold in the market?
(b) What price will consumers pay in the market?
(c) By how much will consumer surplus change as a result of the tax?
(d) By how much will the producer surplus change as a result of the tax?
(e) How much revenue will the government collect from this excise tax?
(1) Calculate the deadweight loss created by the tax.
Price
$120
$90
$30
0
1,000
2.000
3,000
Quantity
A) At the equilibrium price before the tax is imposed, what area represents consumer surplus? What area represents produce surplus? B) Say that a tax of $T per unit is imposed in the industry. What area now represents consumer surplus? What area represents producer surplus? C) What area represents the deadweight cost of the tax? D) What area represents how much tax revenue is raised by the tax?
Assume competitive markets (prices are given) and that the demand is more elastic than supply. Which of the following statements is correct?
A. We do not have sufficient information to infer which surplus is greater
B. Consumer surplus will be larger than producer surplustyping
C. Consumer surplus will be exactly the same as producer surplus
D. Consumer surplus will be smaller than producer surplus.
Give typing answer with explanation and conclusion
Chapter 7 Solutions
EBK EXPLORING MACROECONOMICS
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