a. Before the tax, the equilibrium quantity is units and equilibrium price is $ After the tax, the equilibrium quantity is units. The price paid by consumers is $ , and the price received by suppliers is $ b. Before the tax, consumer surplus is $ and after the tax, consumer surplus is $ c. Locate the tax revenue on the graph. Wheretown will receive $ in tax revenue.
a. Before the tax, the equilibrium quantity is units and equilibrium price is $ After the tax, the equilibrium quantity is units. The price paid by consumers is $ , and the price received by suppliers is $ b. Before the tax, consumer surplus is $ and after the tax, consumer surplus is $ c. Locate the tax revenue on the graph. Wheretown will receive $ in tax revenue.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Please answer all parts of the question and show your work.
Transcribed Image Text:The table and graph below show supply and demand in the market for sub sandwiches in Wheretown, where the local government wants to raise revenue via a $1 tax on all sandwiches, collected from sandwich shops.
Price
$1
$10
Price of Sub
Sandwich ($)
8.00
Quantity
Demanded
Quantity Supplied
100
$9
s,
7.50
10
90
$8
7.00
6.50
20
80
$7
30
70
6.00
40
60
$6
5.50
5.00
4.50
50
60
70
80
50
$5
40
$4
30
20
4.00
$3
3.50
90
10
$2
3.00
100
D.
2.50
110
$1
2.00
120
20
40
60
80 100 120 140 160
Quantity
First, imagine plotting the after-tax supply curve (which we can't do on Canvas but will demonstrate via the Zoom whiteboard).
a. Before the tax, the equilibrium quantity is
units and equilibrium price is $
After the tax, the equilibrium quantity is
units. The price paid by consumers is $
and the price received by suppliers is $
b. Before the tax, consumer surplus is $
and after the tax, consumer surplus is $
c. Locate the tax revenue on the graph. Wheretown will receive $
in tax revenue.
d. The deadweight loss caused by the tax is: $
e. Suppose it costs Wheretown $35 to collect the tax revenue from sandwich shops.
In the end, the amount of revenue from the sub tax that is actually available to spend on public services is: $
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