Using the attached graph, calculated the following: Consumer surplus before tax Producer surplus before tax DWL before tax Consumer surplus after tax Producer surplus after tax DWL after tax Who bears the bigger burden of this tax?

Using the attached graph, calculated the following: Consumer surplus before tax Producer surplus before tax DWL before tax Consumer surplus after tax Producer surplus after tax DWL after tax Who bears the bigger burden of this 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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Question

Using the attached graph, calculated the following:

Consumer surplus before tax
Producer surplus before tax
DWL before tax
Consumer surplus after tax
Producer surplus after tax
DWL after tax
Who bears the bigger burden of this tax?

Price (dollars per MP3 player)
260
210
200
190
150
Consumer
surplus
Tax
revenue
Producer
surplus
S + tax
S
Deadweight
loss
D
0 1 2 3 4 5 6 7 8 9 10
Quantity (thousands of MP3 players per week)

Definition Definition Producer’s gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price and up to the equilibrium quantity.

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