Suppose the demand and supply curves are described byMC = 2.45 + 1.1QWTP = 7.55 - 0.90QFurther, suppose a tax is placed on either buyers or sellers and the size of the tax is 1.7.A. What is consumer surplus after the tax?B. What is producer surplus after the tax?C. What is the tax revenue?D. What is the deadweight loss?E. Which curve is more elastic?DemandO Supply

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A. What is consumer surplus after the tax?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Laffer Curve Analysis

In terms of economics, the Laffer curve was popular among those economists who were or who belonged to the supply side of the economic peripheral. This concept was popularized by the famous supply-side economist known as Arthur Laffer. This curve illustrated the relationship between the tax rates and government revenue. It is already known that the tax which the public or individuals residing in an economy bear is the revenue or income of the government with the help of which the government does all the necessary works in the society, which is beneficial for the economy.

Question

Suppose the demand and supply curves are described by
MC = 2.45 + 1.1Q
WTP = 7.55 - 0.90Q
Further, suppose a tax is placed on either buyers or sellers and the size of the tax is 1.7.
A. What is consumer surplus after the tax?
B. What is producer surplus after the tax?
C. What is the tax revenue?
D. What is the deadweight loss?
E. Which curve is more elastic?
Demand
O Supply

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