Answered: 1. Understanding the implications of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The following graph represents the demand and supply for blinkies (an imaginary product). The black point (plus symbol) indicates the pre-tax equilibrium. Suppose the government has just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario.

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1. Understanding the implications of taxes on welfare
The following graph represents the demand and supply for blinkies (an imaginary product). The black point (plus symbol) indicates the pre-tax
equilibrium. Suppose the government has just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario.
PRICE (Dollars per blinkie)
70.00
55.00
40.00
Demand
A
B
D
F
6
с
E
9
Supply
QUANTITY (Blinkies)
(?)

Complete the following table, given the information presented on the graph.
Result
Price producers receive after tax
Per-unit tax
Equilibrium quantity after tax
$
$
Value
In the following table, indicate which areas on the previous graph correspond to each concept. Check all that apply.
Concept
Producer surplus before the tax is imposed
Consumer surplus after the tax is imposed
Deadweight loss after the tax is imposed
A
U
B
U
0
U
E
U
F

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