Figure 8-11

-Refer to Figure 8-11.Suppose Q₁ = 4; Q₂ = 7; P₁ = $6; P₂ = $8; and P₃ = $10.Then,when the tax is imposed,

Question

Figure 8-11
 
-Refer to Figure 8-11.Suppose Q₁ = 4; Q₂ = 7; P₁ = $6; P₂ = $8; and P₃ = $10.Then,when the tax is imposed,

Quizplus · Accepted Answer

When the tax is imposed, the new equilibrium price will be $10 + $1 = $11. Quantity demanded will be 4, and quantity supplied will be 3. Consumer surplus decreases by (1/2) × (6 – 11) × 4 = $10. Producer surplus decreases by (1/2) × (11 – 8) × 3 = $4.5. The deadweight loss equals (1/2) × (8 – 6) × (7 – 4) = $3. Therefore, all of the above (A, B, and C) are correct.

Figure 8-11 -Refer to Figure 8-11.Suppose Q₁ = 4; Q₂ = 7;