Question
Answered step-by-stepAsked by MateBuffalo49 on coursehero.com
. Complete the following table by using the previous graphs to...
Image transcription text
2. Taxes and welfare
Consider the market for commercial fans. The following graph shows the demand and supply for commercial fans before the government imposes any
taxes.
First, use the black point (plus symbol) to indicate the equilibrium price and quantity of commercial fans 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.
Before Tax
150
-+
135
Demand
Equilibrium
120
A
105
90
Consumer Surplus
75
PRICE (Dollars per fan)
60
Producer Surplus
45
Supply
30
O
0
70 140 210 280 350 420 490 560 630 700
QUANTITY (Fans)
Image transcription text
Suppose the government imposes an excise tax on commercial fans. The black line on the following graph shows the tax wedge created by a tax of
$60 per fan.
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.
After Tax
150
135
Demand
Tax Revenue
120
A
105
90 Tax Wedge
Consumer Surplus
75
PRICE (Dollars per fan)
60
Producer Surplus
45
Supply
30
Deadweight Loss
15
0
70
140
210 280 3
420 490
560
630
700
QUANTITY (Fans)
Image transcription text
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 After Tax
(Dollars) (Dollars)
Consumer Surplus
Producer Surplus
Tax Revenue 0 Deadweig ht Loss 0
Answer & Explanation
Solved by verified expertAnswered by Prisoner8755121 on coursehero.com
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