Question

In: Economics

Suppose there is a $1.50 per unit tax levied on sellers


Consider the market below 

a. Suppose there is a $1.50 per unit tax levied on sellers. Draw the after-tax supply curve. Instructions: Use the tool provided (S2) to draw the after-tax supply curve. Be sure your endpoints are at Q = 0 and Q = 100 


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b. Plot the after-tax price paid by consumers and the after-tax price paid by sellers. Instructions: Use the tools provided to draw the after-tax price paid by consumers (After-tax Pc) and the after-tax price paid by sellers (After-tax Ps) 


c. Draw consumer surplus, producer surplus, tax revenue, and deadweight loss after the tax Instructions: Use the tools provided to draw consumer surplus (CS), producer surplus (PS), tax revenue (Tax Revenue), and deadweight loss (DWL).


d. Deadweight loss is _______ million 


e. Total surplus is _______  million

Solutions

Expert Solution

a ) Ans : After tax supply curve is drawn in the following diagram.

b ) Ans: After tax PC and PS are shown in the following diagram.

c ) Ans: After tax CS , PS , Tax revenue and Dead weight loss are shown in the following diagram.

d ) Deadweight loss = $15 million

e ) Total surplus = $ 60 million

Rahul Sunny answered 2 years ago
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