Question

Provider A Provider B m. Call provider: a. What is the cost to your friend of Jb. How many minutes would your frie C. Flow much would he end un paving every in d. How much consumer surplus would neo ost to your friend of an extra minute on the phone? y minutes would your friend talk on the phone? he end up paying every month? consumer surplus would he obtain? 150 720 105 OO 100 100 (Hint for d: Graph the demand cu d: Graph the demand curve and recall the formula for the triangle. Figure out intercept of vertical axis using the equation.) Which provider would you recommend that your friend choose? A. 50 100 quantity 10. (5 pts.) Refer to Figure above for questions a - h. a. The equilibrium price in the market is $_5__and the equilibrium quantity is_10 b. The amount of producer surplus in the market before the tax is $_SO c. The price that buyers pay after tax is imposed is $ d. The effective price that sellers receive after the tax is imposed is $ e. The amount of tax per unit sold is $ f. The per-unit burden of the tax on buyers (amount paid by buyers per unit purchased) is $ g. The per-unit burden of the tax on sellers (amount paid by sellers per unit sold) is h. How much tax revenue does this tax generate for the government? $ i. What is the loss in producer surplus in this market after the tax is applied? $

Answer 1

A. The equilibrium price is $ 5 and the equilibrium quantity is 100.

B. The amount of producer surplus in the market before the tax is $ 250.

Producer surplus = (1/2)×(5-0)×(100-0) = $ 250

C. The price that buyers pay after tax is imposed is $ 7.

D. The effective price that sellers receive after the tax is imposed is $ 3.

E. The amount of tax per unit sold is $ 4.

Tax per unit = buyers price - sellers price = $ 7 - $ 3 = $ 4 per unit.

F. The per unit burden of the tax on buyers (amount paid by buyers per unit purchased) is $ 2.

Burden of tax on buyers = $ 7 - $ 5 = $ 2 per unit

G. The per unit burden of the tax on sellers (amount paid by sellers per unit sold) is $ 2.

Burden of tax on sellers = $ 5 - $ 3 = $ 2 per unit

H. Tax revenue = $ 4 × 50 = $ 200

I. Producer surplus after tax = (1/2)×(3-0)×(50-0) = $ 75

Loss in producer surplus (after tax) = $ 250 - $ 75 = $ 175.

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