The impact of tax on pizza.

Question

The market for pizza is characterized by a downward-sloping demand curve and an upward-sloping supply curve. a. Draw the competitive market equilibrium. Label the price, quantity, consumer surplus, and producer surplus. Is there any deadweight loss? Explain. b. Suppose that the government forces each pizzeria to pay a $1 tax on each pizza sold. Illustrate the effect of this tax on the pizza market, being sure to label the consumer surplus, producer surplus, government revenue, and deadweight loss. How does each area compare to the pre-tax case?

Answer 1

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 8, Problem 1PA

Sub part (a):

To determine

The impact of tax on pizza.

Sub part (b):

To determine

The impact of tax on pizza.

Sub part (c):

To determine

The impact of tax on pizza.

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The market for pizza is characterized by a downward-sloping demand curve and an upward-sloping supply curve. a. Draw the competitive market equilibrium. Label the price, quantity, consumer surplus, and producer surplus. Is there any deadweight loss? Explain. b. Suppose that the government forces each pizzeria to pay a $1 tax on each pizza sold. Illustrate the effect of this tax on the pizza market, being sure to label the consumer surplus, producer surplus, government revenue, and deadweight loss. How does each area compare to the pre-tax case?

(e) (i) Calculate the consumer surplus after the 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. Answer: Answer Price S- 18 Question 18 12 10 (e) (ii) Calculate the producer surplus after the tax. Answer: 10 12 Qua Answer Question 19 (e) (ii) Tax revenue. Answer: Question 20 Price received by producers (e) (iv) Deadweight loss Quantity of cigarettes sold Answer: Price paid by consumers Answer the tax Question 21 (e) (v) Total surplus after tax Answer: S PhotoGrid

2. Using the following graph, answer the following questions. Also, show/Label your answers for parts a-e on the graph as well. Price 20 18 16 14 12 10 6. 4 6 8 10 12 14 16 Quantity 2 a. Suppose a $4 per-unit tax is imposed on the sellers of this good. What price will buyers pay for the good after the tax is imposed? b. Suppose a $4 per-unit tax is imposed on the sellers of this good. How much is the burden of this tax on the buyers in this market?

Answer 2

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 8, Problem 1PA

Sub part (a):

To determine

The impact of tax on pizza.

Sub part (b):

To determine

The impact of tax on pizza.

Sub part (c):

To determine

The impact of tax on pizza.

Expert Solution & Answer

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Check out sample textbook solution

Answer 3

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 8, Problem 1PA

Sub part (a):

To determine

The impact of tax on pizza.

Sub part (b):

To determine

The impact of tax on pizza.

Sub part (c):

To determine

The impact of tax on pizza.

Expert Solution & Answer

Trending nowThis is a popular solution!

See solution

Check out sample textbook solution

Answer 4

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 8, Problem 1PA

Sub part (a):

To determine