Question

1. Understanding the implications of taxes on welfare The following graph represents the demand and supply for an imaginary good called a pinckney. The black point (plus symbol) indicates the pre-tax equilibrium. Suppose the government has just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario Demand Supply 28.00 24.00 20.00 QUANTITY (Pinckneys) Complete the following table, given the information presented on the graph Result Equilibrium quantity after tax Price producers receive after tax Per-unit tax Value In the following table, indicate which of the previous graph's areas corresponds to each concept. Check all that apply Concept Consumer surplus after the tax is imposed producer surplus after the tax is imposed Deadweight loss after the tax is imposed

Answer 1

Ans:

Consumer surplus is the area below the demand curve and above the price.

Producer surplus is the area above the supply curve and below the price.

1) Equilibrium quantity after tax = 15 pinckneys

2) Price producers receive after tax = $20 per pinckneys

3) Per unit tax = $28 - $20

   = $8

4) Table

Concept
Consumer surplus after the tax is imposed	A
Producer surplus after the tax is imposed	F
Deadweight loss after the tax is imposed	C,E

Answer 2

The answer above is correct but for Price consumers pay after tax the answer is 28.00