Question

Market for Product O $24 $21 $18 $15 $12 $9 $6 $3 $0 0 6 12 18 24 30 36 42 48 54 60 66 72 78 In equilibrium, total surplus is (Select] If there is an increase in supply we know that consumer surplus [Select] If the government places a $9 tax on sellers then sellers receive (Select] If the government places a $9 tax on sellers then tax revenue will be (Select] If the government places a price floor at $9 then there will be (Select]

Answer 1

Total surplus will be the area of the triangular region formed between the demand line and the supply line. In this case it is equal to 0.5*(21-3)*24 = 216

whenever there is an increase in the supply there is a decrease in the price level and an increase in the quantity if we assume that the demand is unchanged. consumer surplus is the area between the demand line and the priceline and since now the price has reduced and quantity is increased we expect the consumer surplus to increase. If there is an increase in supply will know that consumer surplus will increase

this tax will shift the supply curve to the left and the new equilibrium price will be $18 and the new equilibrium quantity will be 12 units. Sellers sellers will receive $9 for each unit because the tax will create a wedge between buyers price of 18 dollars and sellers price of 9 dollars. The answer is $9

Tax revenue in this case will be 9*12 = $108

No shortage or surplus because price floor is not binding at $9