The demand for a good is given by QD = 99−3P and the supply by QS = 2P + 4. The market for this good is in equilibrium. Now, the government introduces a tax of $5 per unit to be paid by the producers. How large is the consumer surplus, producer surplus, and total welfare generated by this market after the introduction of the tax? Show your calculations. Sketch the market diagram and label all relevant prices and quantities.

The demand for a good is given by QD = 99−3P and the supply by QS = 2P + 4. The market for this good is in equilibrium. Now, the government introduces a tax of $5 per unit to be paid by the producers. How large is the consumer surplus, producer surplus, and total welfare generated by this market after the introduction of the tax? Show your calculations. Sketch the market diagram and label all relevant prices and quantities.

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter4: Prices: Free, Controlled, And Relative

Section: Chapter Questions

Problem 4WNG

See similar textbooks

Similar questions

The demand and supply equations for a product are: Q* = 0.2 300 – 6P and Q' = -40 + 6P. Determine the market equilibrium and draw graphs. Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumers pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graphs and explain. Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producers surplus and dead weight loss.
The demand and supply equations for a product are: Q= 300 — 6P and Q.= -40 + 6P. Determine the market equilibrium and draw graphs. Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumers pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graphs and Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producer surplus, and deadweight loss.
The demand and supply equations for a product are: Qd= 300 — 6P and Qs= -40 + 6P. Determine the market equilibrium and draw graphs. Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumers pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graphs and explain. Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producers surplus, and deadweight loss
The demand and supply equations for a product are: Qd = 300 - 6P and Qs = -40 + 6P. Determine the market equilibrium and draw graphs. Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumer pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graphs and explain. Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producers surplus and dead weight loss.
You are given the following market data for Venus automobiles in Saturnia. Demand: P = 35,000 - 0.5Q Supply: P = 8,000 + 0.25Q where P = Price and Q = Quantity. a. b. C. Calculate the equilibrium price and quantity. Calculate the consumer surplus in this market. Calculate the producer surplus in this market. Use the editor to format your answer
If a tax of $1.20 is imposed on consumers in this market, what is the tax revenue?
At the current market equilibrium, the price elasticity of supply for a certain good is much lower than the price elasticity of demand. if the government imposes a $5 specific tax on this good, who will bear more of the burden of the tax?
Suppose the supply of a good by domestic firms is QSD = 10 + 2P and the supply by foreign firms is QSF = 10 + P. The domestic demand for the product is given by Qd = 30 − P. 1. In the absence of a quota, what is the total supply of the good? 2. What are the equilibrium price and quantity of the good? 3. Suppose a quota of 10 units is imposed. What is the total supply of the product? 4. Determine the equilibrium price in the domestic market under the quota of 10 units.
The demand and supply equations for a product are: Q"= 300 – 6P and Q' = -40 + 6P. Determine the market equilibrium and draw graphs. Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumers pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graphs and explain. • Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producers surplus and dead weight loss.
The market demand and supply function for Good A are given by: Qp = 200 - 5P %3D Qs = 100 + 3P The federal government plans to levy a specific tax on each unit of Good A produced. How much tax should the federal government levy if they want to stabilize the price that sellers receive at $10? $4 $6 $2 $10 Page 9 of 55
The market supply and demand for a product are shown in the diagram below. Is the price elasticity of supply less than one, equal to one, or greater than one? Explain. Calculate consumer surplus at the equilibrium price. Show your work. Now suppose the government imposes a per-unit tax of $1 on producers. What happens to total revenue received by producers after they pay the tax to the government? Explain. Will producer surplus increase, decrease, or stay the same? Will total surplus increase, decrease, or stay the same? Explain.
Consumer surplus is a measure of the difference between: a) The price which a consumer has to pay and the cost of producing the good (in a diagram, the area between the market price, and the supply curve). b) The consumer’s willingness to pay, and the cost of production (the area between the demand curve and the supply curve). c) The value which a consumer places on a unit of the good, and the market price (the area between the demand curve and the market price line). d) The marginal revenue from sales and the marginal cost of sales (the area between the marginal revenue and the marginal cost curves).