ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Suppose the government imposes an excise tax on commercial fans. The black line on the following graph shows the tax wedge created by a tax of
$40 per fan.
First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade the
area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representing total producer
surplus after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss.
PRICE (Dollars per fan)
200
180
160
Demand
140
120
100
80
60
40
20
Tax Wedge
Supply
After Tax
0
0
50
100
150
200
250
300
350
400 450 500
Tax Revenue
Δ
Consumer Surplus
Producer Surplus
Deadweight Loss
?
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Transcribed Image Text:Suppose the government imposes an excise tax on commercial fans. The black line on the following graph shows the tax wedge created by a tax of $40 per fan. First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade the area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representing total producer surplus after the tax. Finally, use the black point (plus symbol) to shade the area representing deadweight loss. PRICE (Dollars per fan) 200 180 160 Demand 140 120 100 80 60 40 20 Tax Wedge Supply After Tax 0 0 50 100 150 200 250 300 350 400 450 500 Tax Revenue Δ Consumer Surplus Producer Surplus Deadweight Loss ?
Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax, and consumer
surplus, producer surplus, tax revenue, and deadweight loss after the tax.
Note: You can determine the areas of different portions of the graph by selecting the relevant area.
Consumer Surplus
Producer Surplus
Tax Revenue
Before Tax
(Dollars)
0
Deadweight Loss
0
After Tax
(Dollars)
expand button
Transcribed Image Text:Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax, and consumer surplus, producer surplus, tax revenue, and deadweight loss after the tax. Note: You can determine the areas of different portions of the graph by selecting the relevant area. Consumer Surplus Producer Surplus Tax Revenue Before Tax (Dollars) 0 Deadweight Loss 0 After Tax (Dollars)
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