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Compute consumer and producer surplus

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Reference no: EM133081069

Consider the market of the previous question in the short run (with 100 firms), and assume that the government imposes a tax of $3 per unit.

(a) What would be the new equilibrium quantity supplied after the tax is imposed?

(b) What would be the price consumers pay and the price sellers receive with the tax? Explain how the burden of the tax is shared between consumers and producers.

(c) Compute consumer and producer surplus before and after the tax. How much government revenue is generated by the tax? How large is the deadweight loss?

Reference no: EM133081069

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