1. Taxes and welfare PRICE (Dollars per air conditioner)40036032028024020016012080400DemandTax Wedge0 200 400Consumer SurplusProducer SurplusTax RevenueDeadweight LossAfter Tax600Supply800 1000 1200 1400 1600 1800 2000QUANTITY (Air conditioners)Before Tax(Dollars)00Tax RevenueAfter Tax(Dollars)Consumer SurplusComplete 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.Producer SurplusDeadweight Loss(? 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)40036032028024020016012080400DemandBefore TaxSupply0 200 400 600 800 1000 1200 1400 1600 1800 2000QUANTITY (Air conditioners)EquilibriumAConsumer Surplus♦Producer SurplusSuppose 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 $80 per air conditioner.First, 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.

Consumer surplus is the difference between the amount the consumer is willing to pay and the amount…

PRICE (Dollars per air conditioner) 400 360 320 280 240 200 160 120 80 40 0 Demand Tax Wedge After Tax Supply 0 200 400 600 800 1000 1200 1400 1600 1800 2000 QUANTITY (Air conditioners) Consumer Surplus Producer Surplus Tax Revenue Deadweight Loss 0 0 Tax Revenue After Tax (Dollars) A Consumer 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) Producer Surplus Deadweight Loss ?

PRICE (Dollars per air conditioner) 400 360 320 280 240 200 160 120 80 40 0 Demand Tax Wedge After Tax Supply 0 200 400 600 800 1000 1200 1400 1600 1800 2000 QUANTITY (Air conditioners) Consumer Surplus Producer Surplus Tax Revenue Deadweight Loss 0 0 Tax Revenue After Tax (Dollars) A Consumer 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) Producer Surplus Deadweight Loss ?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

1. Taxes and welfare

PRICE (Dollars per air conditioner)
400
360
320
280
240
200
160
120
80
40
0
Demand
Tax Wedge
0 200 400
Consumer Surplus
Producer Surplus
Tax Revenue
Deadweight Loss
After Tax
600
Supply
800 1000 1200 1400 1600 1800 2000
QUANTITY (Air conditioners)
Before Tax
(Dollars)
0
0
Tax Revenue
After Tax
(Dollars)
Consumer 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.
Producer Surplus
Deadweight Loss
(?

Consider the market for air conditioning units. The following graph shows the demand and supply for air conditioning units before the government
imposes 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 the
green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond
symbol) to shade the area representing total producer surplus (PS) at the equilibrium price.
PRICE (Dollars per air conditioner)
400
360
320
280
240
200
160
120
80
40
0
Demand
Before Tax
Supply
0 200 400 600 800 1000 1200 1400 1600 1800 2000
QUANTITY (Air conditioners)
Equilibrium
A
Consumer Surplus
♦
Producer Surplus
Suppose the government imposes an excise tax on air conditioning units. The black line on the following graph shows the tax wedge created by a tax
of $80 per air conditioner.
First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade the
area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representing total producer
surplus after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss.

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