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Figure and Table: The Market for Taxi Rides
-(Figure and Table: The Market for Taxi Rides) Look at the figure and table The Market for Taxi Rides. If the government imposes an excise tax of $1 per ride (causing the supply curve to shift upward by that amount), then the government will collect tax revenues of _____. However, the tax will cause a _____ deadweight loss to society.

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Figure and Table: The Market for Taxi Rides  
-(Figure and Table: The Market for Taxi Rides) Look at the figure and table The Market for Taxi Rides. If the government imposes an excise tax of $1 per ride (causing the supply curve to shift upward by that amount), then the government will collect tax revenues of _____. However, the tax will cause a _____ deadweight loss to society.

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The excise tax of $1 per ride will increase the price of a taxi ride from $10 to $11. At the new price, the quantity of taxi rides demanded will fall from 5 million to 4.5 million. The government will collect tax revenues of $1 per ride on the 4.5 million rides that are taken, for a total of $4.5 million. The deadweight loss to society is the loss of consumer and producer surplus that results from the tax. The consumer surplus loss is the difference between the price consumers are willing to pay for the 4.5 million rides they take and the price they actually pay, which is $11 per ride. The producer surplus loss is the difference between the price producers are willing to accept for the 4.5 million rides they take and the price they actually receive, which is $10 per ride. The total deadweight loss is the sum of the consumer and producer surplus losses, which is $0.5 million.

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