Question1:
1.1 Refer to the figure above. Suppose S and D are the initial supply and demand curves and a tax represented by S' is imposed on sellers. The distance that represents the per unit amount of the tax is
A. EG.
B. 0A.
C. HJ.
D. IH.
1.2 Refer to the figure above. If S and D are the initial supply and demand curves, after the tax represented by S' is imposed, the equilibrium price is the distance
A. 0M.
B. 0E.
C. 0A.
D. 0G.
1.3 Refer to the figure above. If S and D are the initial supply and demand curves, the amount of tax revenue raised by this tax, represented by S', is equal to the area represented by the area
A. EGJI.
B. AGJH.
C. EAHI.
D. IJC.
1.4 Refer to the figure above. If S and D are the initial supply and demand curves and S' represents a tax, consumer surplus after the tax is imposed is represented by the area
A. MAC.
B. MEI.
C. MAHI.
D. EAHI.
Homework Answers
1.1. EG is the amount of tax per unit.
Answer: A. EG
1.2. Before the tax the equilibrium price was 0A, but after the tax the equilibrium price rise to 0E. The new equilibrium price is the price at which the demand curve meets the new supply curve.
Answer: B. 0E
1.3. After the imposition of tax the government collects revenue equal to the area EGJI.
Answer: A. EGJI
1.4. After tax the area of consumer surplus is MEI. The area below the demand curve and above the new price line is the area of consumer surplus.
Answer: B. MEI.
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