Consider a perfectly competitive market, with demand given by and supply given by The government imposes...

Consider a perfectly competitive market, with demand given by and supply given by The government imposes a per unit tax of T=2. What is the new producer surplus after the imposition of the tax?

Supply = 20- Q, Demand P = Q

18

27

9

None of the other answers is correct.

81

Expert Solution

Answer Summary:

The supply curve after tax will be P = Q + 2. The producer surplus is the area above the supply curve and below the price line. The producer surplus after tax is equal to (81/2) i.e 40.5. Thus, none of the given answers are correct.

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Rahul Sunny answered 2 years ago

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