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Suppose the government imposes an excise tax on air conditioning units. The black line on the following graph shows the tax wedge created by a tax of $160 per air conditioner.

Suppose the government imposes an excise tax on air conditioning units. The black line on the following graph shows the tax wedge created by a tax of $160 per air conditioner.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose the government imposes an excise tax on air conditioning units. The black line on the following graph shows the tax wedge created by a tax of $160 per air conditioner. 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 air conditioner) 400 360 320 280 240 Tax Wedge 200 160 120 80 40 Demand 0 0 120 240 360 480 600 720 840 960 1080 1200 QUANTITY (Air conditioners) Supply Consumer Surplus Producer Surplus After Tax Tax Revenue Deadweight Loss Tax Revenue Complete the following table by using the previous graphs determine the values of consumer and producer surplus before the tax, and consumer surplus, producer surplus, tax revenue, and deadweight loss after the tax. Consumer Surplus Note: You can determine the areas of different portions of the graph by selecting the relevant area. Before Tax (Dollars) After Tax (Dollars) 0 0 Producer Surplus Deadweight Loss
Transcribed Image Text:Suppose the government imposes an excise tax on air conditioning units. The black line on the following graph shows the tax wedge created by a tax of $160 per air conditioner. 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 air conditioner) 400 360 320 280 240 Tax Wedge 200 160 120 80 40 Demand 0 0 120 240 360 480 600 720 840 960 1080 1200 QUANTITY (Air conditioners) Supply Consumer Surplus Producer Surplus After Tax Tax Revenue Deadweight Loss Tax Revenue Complete the following table by using the previous graphs determine the values of consumer and producer surplus before the tax, and consumer surplus, producer surplus, tax revenue, and deadweight loss after the tax. Consumer Surplus Note: You can determine the areas of different portions of the graph by selecting the relevant area. Before Tax (Dollars) After Tax (Dollars) 0 0 Producer Surplus Deadweight Loss
Consider the market for air conditioning units. The following graph shows the demand and supply for air conditioning units before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of air conditioning units in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. PRICE (Dollars per air conditioner) 400 360 320 280 240 200 160 120 80 40 0 0 Demand 120 240 Supply Before Tax 360 480 600 720 840 960 1080 1200 QUANTITY (Air conditioners) + Equilibrium A Consumer Surplus Producer Surplus ?
Transcribed Image Text:Consider the market for air conditioning units. The following graph shows the demand and supply for air conditioning units before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of air conditioning units in the absence of a tax. Then use the green point (triangle symbol) to shade the area representing total consumer surplus (CS) at the equilibrium price. Next, use the purple point (diamond symbol) to shade the area representing total producer surplus (PS) at the equilibrium price. PRICE (Dollars per air conditioner) 400 360 320 280 240 200 160 120 80 40 0 0 Demand 120 240 Supply Before Tax 360 480 600 720 840 960 1080 1200 QUANTITY (Air conditioners) + Equilibrium A Consumer Surplus Producer Surplus ?
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