**Transcription and Explanation for Educational Website**---**Scenario:**Suppose that a local government, concerned about the externalities associated with gasoline consumption, puts a $12 tax on gasoline purchases. The market for gasoline in the town is shown below.---**Graph Description:**- The horizontal axis (Q) represents the quantity of gasoline.- The vertical axis (P) represents the price of gasoline.- There are three lines plotted on the graph: 1. **S / MSC (Supply / Marginal Social Cost)**: This upward-sloping line represents the supply curve, taking into account the externalities, hence labeled as the Marginal Social Cost. 2. **D (Demand)**: This downward-sloping line represents the demand for gasoline. 3. **MSB (Marginal Social Benefit)**: This is another downward-sloping line, positioned slightly below and parallel to the Demand (D) line, indicating the reduced social benefit when externalities are considered.- The intersection of the Demand (D) line and the Supply / MSC (S / MSC) line represents the market equilibrium without tax.- The intersection of the MSB line and the Supply / MSC line shows the socially optimal level of gasoline consumption when accounting for externalities.---**Tax Impact:**The government’s imposition of a $12 tax on gasoline would shift the effective supply curve upwards by $12. This results in a higher equilibrium price and a lower equilibrium quantity.---**Deadweight Loss (DWL):**- The graph requires the calculation of the Deadweight Loss (DWL) resulting from the $12 tax policy.- DWL refers to the loss of economic efficiency when the equilibrium outcome is not achievable or not achieved.- The area of DWL is typically represented as a triangle on the graph formed between the quantities and prices of the socially optimal and taxed equilibriums.---**Question:**What is the DWL that results from the policy? $____*Note: Further calculations are needed to determine the exact numerical value of DWL.*--- This transcription provides the information and concepts necessary for understanding how externalities and government policies can impact market outcomes and efficiency.

Consumption is an activities through which goods and services are used by the people.

Suppose that a local government, concerned about the externalities associated with gasoline consumption, puts a $12 tax on gasoline purchases. The market for gasoline in the town is shown below. P 18 S/ MSC 16 14 12 10 D 8 6. 4 MSB 2 4 6 8. 10 12 14 16 18 Q What is the DWL that results from the policy? $_ 20

Suppose that a local government, concerned about the externalities associated with gasoline consumption, puts a $12 tax on gasoline purchases. The market for gasoline in the town is shown below. P 18 S/ MSC 16 14 12 10 D 8 6. 4 MSB 2 4 6 8. 10 12 14 16 18 Q What is the DWL that results from the policy? $_ 20

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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