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An annual city permit fee causes the supply curve for hot dogs from food carts to shift from S1 to S2. The fee is based on number of units sold and therefore works like a per-item tax on sellers. Use the area tool to draw the area representing the deadweight loss that is due to the tax. To refer to the graphing tutorial for this question type, please click here. Price ($) 8. S2 S1 7.5 6.5 6 5.5 4.5 4 3.5 3 2.5 1.5 1 0.5 4 VIEW SOLUTION SUBMIT ANSWER < 11/14 > 7 OF 14 QUESTIONS COMPLETED

An annual city permit fee causes the supply curve for hot dogs from food carts to shift from S1 to S2. The fee is based on number of units sold and therefore works like a per-item tax on sellers. Use the area tool to draw the area representing the deadweight loss that is due to the tax. To refer to the graphing tutorial for this question type, please click here. Price ($) 8. S2 S1 7.5 6.5 6 5.5 4.5 4 3.5 3 2.5 1.5 1 0.5 4 VIEW SOLUTION SUBMIT ANSWER < 11/14 > 7 OF 14 QUESTIONS COMPLETED

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### Impact of Permit Fees on Supply Curve An annual city permit fee causes the supply curve for hot dogs from food carts to shift from S1 to S2. The fee is based on the number of units sold and therefore works like a per-item tax on sellers. Use the area tool to draw the area representing the deadweight loss that is due to the tax. To refer to the graphing tutorial for this question type, please click [here](#). ### Graph Explanation - **Axes**: The graph features a typical supply and demand model. - The horizontal axis represents quantity. - The vertical axis represents price in dollars. - **Lines**: - **S1 (Original Supply Curve)**: This line represents the original supply of hot dogs before the permit fee is applied. - **S2 (New Supply Curve)**: This line shows the new supply position after the permit fee, indicating a leftward shift due to the additional cost per item. - **D (Demand Curve)**: This demand curve remains unchanged, demonstrating consumer demand at various price levels. - **Shift Explanation**: - The shift from S1 to S2 highlights the impact of the permit fee, increasing the cost to sellers per unit. This results in a higher price and a lower quantity supplied, creating potential market inefficiencies. This model illustrates how taxes and fees can affect market supply, price, and create economic deadweight loss.
Transcribed Image Text:### Impact of Permit Fees on Supply Curve An annual city permit fee causes the supply curve for hot dogs from food carts to shift from S1 to S2. The fee is based on the number of units sold and therefore works like a per-item tax on sellers. Use the area tool to draw the area representing the deadweight loss that is due to the tax. To refer to the graphing tutorial for this question type, please click [here](#). ### Graph Explanation - **Axes**: The graph features a typical supply and demand model. - The horizontal axis represents quantity. - The vertical axis represents price in dollars. - **Lines**: - **S1 (Original Supply Curve)**: This line represents the original supply of hot dogs before the permit fee is applied. - **S2 (New Supply Curve)**: This line shows the new supply position after the permit fee, indicating a leftward shift due to the additional cost per item. - **D (Demand Curve)**: This demand curve remains unchanged, demonstrating consumer demand at various price levels. - **Shift Explanation**: - The shift from S1 to S2 highlights the impact of the permit fee, increasing the cost to sellers per unit. This results in a higher price and a lower quantity supplied, creating potential market inefficiencies. This model illustrates how taxes and fees can affect market supply, price, and create economic deadweight loss.
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