QUESTION 4 Consider the linear demand curve: D(p) = 10 - 2p (a) What is the consumer surplus when p=2? Show it by using calculus or graph, not both. (b) If the government imposes a one-dollar tax on the price p=2, what is the change in consumer surplus? What is the using calculus or graph, not both.

QUESTION 4 Consider the linear demand curve: D(p) = 10 - 2p (a) What is the consumer surplus when p=2? Show it by using calculus or graph, not both. (b) If the government imposes a one-dollar tax on the price p=2, what is the change in consumer surplus? What is the using calculus or graph, not both.

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Application: The Cost Of Taxation

Section: Chapter Questions

Problem 8PA

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Graph B.5. shows the economics offects of a per-unit tax Refer to Graph B 5. to answer (38 following questions Graph B.5 P S P₁ D₂ D₁ Q Q₁ Q₂ Qs (a) is the tax levied on buyers or on sellers? (b) What is the price buyers pay after the tax is imposed? (c) What is the price the sellers receive after the tax is imposed? (d) What area represents government tax revenue after the tax is imposed? Ps ܘ ܘ ܘ ܘ ܘ P₂ B C F 11 J К H L M
Suppose the government places a tax on a product. How does the cost of the tax compare with the revenue raised? The cost of the tax to buyers and sellers is less than the revenue raised from the tax by the government. O Without additional information, such as the elasticity of demand for this product, it is impossible to compare tax cost with tax revenue. The loss of surplus to buyers and sellers exceeds the revenue raised from the tax by the government. The cost of the tax to buyers and sellers equals the revenue raised from the tax by the government.
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