Question

P-10 P 2 100 Use the figure to answer questions 11 to 14 I1. Suppose that the consumer surplus after tax is 160, then tax revenues A. 4 B. 80 C. 320 D. 480 12. The loss in the producer surplus due to tax equals: A. 20 B. 40 C. 160 D. 180 13. The Dead Weight Loss equals A. 20 B. 40 C. 60 D. 80 14. Which of the following statements is TRUE Consumers pay more taxes than producers. Producers pay more taxes than consumers. Consumers and producers pay the same tax. More information needed to answer A. B. C. D. 15. All the tax will be paid by consumers if A. the demand is perfectly elastic B. the demand is perfectly inelastic C. the demand curve is horizontal D. the demand is unitary elastic

Answer 1

Area of rectangle = Base x height

Area of triangle = 1/2 x base x height

First of all find out P = ?

Consumer Surplus = 1/2 x change in price x change in quantity

160 = 1/2 x dp x (80-0)

dP = 4

P ? = 10 - 4 = 6

Tax revenue = Area of rectangle = (6-2) x (80-0) = 320

11. c 320

12. d. 180

Loss in producer surplus = Area of rectangle + area of triangle

Loss = 80 x 2 + 1/2 x (100-80) x 2

Loss = 160 + 20 = 180

13. B. 40

Dead weight loss = Area of triangle = 1/2 x (100-80) x(6-2)

DWL = 40

15. B. Perfectly inelastic deamnd curve s upward sloping and change in supply curve due to tax makes consumer to pay all the tax.