242220A18Supply16141210B4Demand3 6 9 12 15 18 21 24 27 30 33 36QUANTITYConsider the market described by the graph above where the vertical distance between points A and B represents a tax in the market. The per-unit burden of the tax on sellers is$4 and the tax results in a loss of $72 in producer surplus.$8 and the tax results in a loss of $24 in producer surplus.$8 and the tax results in a loss of $72 in producer surplus.$4 and the tax results in a loss of $24 in producer surplus.PRICE

The amount of tax is equal to the difference between the price that consumers pay and price received by sellers. Producer surplus is the area above the supply curve and below the price.Ans) the correct option is a) $ 4 and the tax results in a loss of $ 72 in Producer surplus. Per unit tax on sellers = price before tax - price receive = 12 - 8 = 4 Loss of Producer surplus = ( 12 - 8) * 12 + 0.5* (12-8) * ( 24 - 12) = 48 + 24 = 72

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22 20 18 Supply 16 14 12 10 B Demand 3 69 12 16 18 21 24 27 30 33 36 QUANTITY Consider the market described by the graph above where the vertical distance between points A and B represents a tax in the market. The $4 and the tax results in a loss of $72 in producer surplus. $8 and the tax results in a loss of $24 in producer surplus. $8 and the tax results in a loss of $72 in producer surplus. $4 and the tax results in a loss of $24 in producer surplus. PRICE

22 20 18 Supply 16 14 12 10 B Demand 3 69 12 16 18 21 24 27 30 33 36 QUANTITY Consider the market described by the graph above where the vertical distance between points A and B represents a tax in the market. The $4 and the tax results in a loss of $72 in producer surplus. $8 and the tax results in a loss of $24 in producer surplus. $8 and the tax results in a loss of $72 in producer surplus. $4 and the tax results in a loss of $24 in producer surplus. PRICE

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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