3. The market equilibrium is said to achieve allocative efficiency. What does this statement mean? Explain using a graph. Indicate the following on the graph: Consumer and producer surplus, market price, and quantity bought and sold. When a tax is introduced, explain how the market changes. In another graph indicate the Consumer and producer surpluses, tax revenue, and deadweight loss from taxation

The following graph represents the demand and supply for pinckneys (an imaginary product). 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 A 32.00 В 24.00 D E 16.00 10 20 QUANTITY (Pinckneys) PRICE (Dollars per pinckney)

Suppose a local government votes to impose an excise tax of $0.90 per bottle on the sales of bottled water. (Assume that all bottles are identical and residents cannot shop elsewhere.) Before the tax the equilibrium price and quantity are $1.20 and 2100 bottles per day. After the tax is imposed, market equilibrium adjusts to a price of $2.00 and quantity of 1400 bottles per day. How much revenue from the tax does the local government collect each day?

Use the letters in the graph below to answer this question letter or letters representing each area in the graph) As a result of the imposition of the excise tax in the market, a deadweight loss of emerges, consumer surplus decline to area The following graph depicts the impact in a market after the government imposes an excise tax. P $16 $10 P₁ $9 P² $7 P²₂ $6 $3 a d QE1 QE 1,000 1,400 Stafer tax and the government gains revenue equal to So before tax D 4,000

Consider the graph below, representing the market for apples. The graph contains the equilibrium of the market without a tax, and the equilibrium with a tax. Price of apples (per basket) Price paid by buyers w/tax Protox Price kept by sellers w/tax A D With a tax 1 Qax Qno tax Supply Demand Quantity of apples (baskets) Which of the following is false about consumer surplus? The surplus lost by buyers who no longer buy apples as a consequence of the tax is F. The surplus lost by buyers who continue to buy apples after the tax is imposed, but now pay more for them, is B. Consumer surplus with a tax is given by area A+B Consumer surplus without a tax is given by area A + B + F