Consider the market for air conditioning units. The following graph shows the demand and supply for air conditioning units before the governmentimposes any taxes.First, use the black point (plus symbol) to indicate the equilibrium price and quantity of air conditioning units in the absence of a tax. Then use thegreen point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamondsymbol) to shade the area representing total producer surplus (PS) at the equilibrium price.PRICE (Dollars per air conditioner)500450PRICE (Dollars per air conditioner)400300250200150100500500450400350300250Suppose the government imposes an excise tax on air conditioning units. The black line on the following graph shows the tax wedge created by a taxof $150 per air conditioner.200First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade thearea representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representing total producersurplus after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss.150100Demand500 140 2800Before TaxDemandSupply420 560 700 840 980 1120 1260 1400QUANTITY (Air conditioners)Tax WedgeAfter Tax+SupplyEquilibrium0 140 280 420 560 700 840 980 1120 1260 1400QUANTITY (Air conditioners)Consumer SurplusProducer SurplusTax RevenueΔConsumer Surplus◇Producer SurplusDeadweight Loss Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax, and consumersurplus, producer surplus, tax revenue, and deadweight loss after the tax.Note: You can determine the areas of different portions of the graph by selecting the relevant area.Consumer SurplusProducer SurplusTax RevenueDeadweight LossBefore Tax(Dollars)00After Tax(Dollars)

Producer surplus:It is the portion above the supply line and below the price line. Producers surplus…

Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax, and consumer surplus, producer surplus, tax revenue, and deadweight loss after the tax. Note: You can determine the areas of different portions of the graph by selecting the relevant area. Before Tax (Dollars) Consumer Surplus Producer Surplus Tax Revenue Deadweight Loss 0 After Tax (Dollars)

Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax, and consumer surplus, producer surplus, tax revenue, and deadweight loss after the tax. Note: You can determine the areas of different portions of the graph by selecting the relevant area. Before Tax (Dollars) Consumer Surplus Producer Surplus Tax Revenue Deadweight Loss 0 After Tax (Dollars)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The table below illustrates the market for Internet services. Use a demand-supply graph to answer the following. Draw a graph of the market for internet services before the tax (only plot the supply and demand functions). Suppose the government imposes a $15 tax per month on the supply side of the market. Sketch the new supply function after the tax.
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Oregon Hikes Cigarette Tax by $2 Last November Oregon voters overwhelmingly approved higher taxes on cigarettes and a new tax on e-cigarettes. Effective January 1, 2021, the state tax on a pack of cigarettes jumped from $1.33 to $3.33, the sixth-highest state tax in the nation. That will bring the average retail price up to $8.33 a pack, almost a 32 percent increase. State officials are expecting a tax windfall of $135 million in 2021 from the higher taxes. That assumes Oregonians continue to buy cigarettes at the same rate. Economists warn, however, that smokers reduce cigarette purchases when prices go up. Typically, unit sales decline by 4 percent when cigarette prices go up by 10 percent. The drop in unit sales may be larger in Oregon, as residents will have the option of purchasing smokes from other states, Indian reservations, and online. Source: Media reports of November 2020–February 2021. According to the News Wire, Instructions: Round your responses to one decimal…
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