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4. PER-UNIT GASOLINE TAX: Suppose that gallons of gasoline are sold in a competitive market. In the very short run, assume supply is given by PS = QS while demand could take any of the three forms below. For each type of demand, draw the free market diagram and find P* and Q*. On your diagram, impose a $1 per-gallon gas tax, find prices PPAID and PRECD, and then indicate consumer surplus (CS), producer surplus (PS), tax revenue (TR), and deadweight loss (DWL) on your diagram. TIP: Some welfare measures may be zero! You needn't calculate the areas. a) "Gotta get to work ASAP!” Demand is given by Qd = 30 for prices at or below $5, but Qd = 0 for P> $5. b) "Hmmm, there may alternatives to driving." Demand is given by Pd= 6 - (1/10)Qd. c) "No way - I'll bike instead!" Demand is given by Qd = 0 for prices above $3, and then ANY Qd is possible at a price of $3.

4. PER-UNIT GASOLINE TAX: Suppose that gallons of gasoline are sold in a competitive market. In the very short run, assume supply is given by PS = QS while demand could take any of the three forms below. For each type of demand, draw the free market diagram and find P* and Q*. On your diagram, impose a $1 per-gallon gas tax, find prices PPAID and PRECD, and then indicate consumer surplus (CS), producer surplus (PS), tax revenue (TR), and deadweight loss (DWL) on your diagram. TIP: Some welfare measures may be zero! You needn't calculate the areas. a) "Gotta get to work ASAP!” Demand is given by Qd = 30 for prices at or below $5, but Qd = 0 for P> $5. b) "Hmmm, there may alternatives to driving." Demand is given by Pd= 6 - (1/10)Qd. c) "No way - I'll bike instead!" Demand is given by Qd = 0 for prices above $3, and then ANY Qd is possible at a price of $3.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Microeconomics equilibrium

4. PER-UNIT GASOLINE TAX: Suppose that gallons of gasoline are sold in a competitive market. In the very short run, assume supply is given by PS = Q$ while demand could take any of the three forms below. For each type of demand, draw the free market diagram and find P* and Q*. On your diagram, impose a $1 per-gallon gas tax, find prices PPAID and PRECD, and then indicate consumer surplus (CS), producer surplus (PS), tax revenue (TR), and deadweight loss (DWL) on your diagram. TIP: Some welfare measures may be zero! You needn't calculate the areas. "Gotta get to work ASAP!" Demand is given by Qª = 30 for prices at or below $5, but Qª = 0 for P> $5. а) b) "Hmmm, there may alternatives to driving." Demand is given by Pd = 6 – (1/10)Q“. с) "No way – I'll bike instead!" Demand is given by Qª = 0 for prices above $3, and then ANY Q' is possible at a price of $3.
Transcribed Image Text:4. PER-UNIT GASOLINE TAX: Suppose that gallons of gasoline are sold in a competitive market. In the very short run, assume supply is given by PS = Q$ while demand could take any of the three forms below. For each type of demand, draw the free market diagram and find P* and Q*. On your diagram, impose a $1 per-gallon gas tax, find prices PPAID and PRECD, and then indicate consumer surplus (CS), producer surplus (PS), tax revenue (TR), and deadweight loss (DWL) on your diagram. TIP: Some welfare measures may be zero! You needn't calculate the areas. "Gotta get to work ASAP!" Demand is given by Qª = 30 for prices at or below $5, but Qª = 0 for P> $5. а) b) "Hmmm, there may alternatives to driving." Demand is given by Pd = 6 – (1/10)Q“. с) "No way – I'll bike instead!" Demand is given by Qª = 0 for prices above $3, and then ANY Q' is possible at a price of $3.
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