Reference no: EM131107584
Consider the market for tractor trailers. The following graph shows the demand and supply for tractor trailers before the government imposes any taxes.
First, use the black point (plus symbol) to indicate the equilibrium price and quantity of tractor trailers 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.
Consider the market for tractor trailers. The following graph shows the demand and supply for tractor trailers before the government imposes any taxes.
Suppose the government imposes an excise tax on tractor trailers. The black line on the following graph shows the tax wedge created by a tax of $80,000 per trailer.
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.
Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax and of consumer surplus, producer surplus, tax revenue, and deadweight loss after the tax.
Note: You can determine the areas of different portions of the graph by selecting the relevant area.
| Before Tax | After Tax |
| (Dollars) | (Dollars) |
| Consumer Surplus |
|
|
| Producer Surplus |
|
|
| Tax Revenue |
0 |
|
| Deadweight Loss |
0 |
|