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What price must americans pay for a car before the tax

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Reference no: EM132328693

ADVANCED QUESTION

The U.S. supply and demand curves for cars cross at $10,000. Foreigners will purchase any quantity of American cars for $15,000 each. One day, the government imposes a tax of $2000 export tax on every American car sold to a foreigner. (Cars sold to Americans are not taxed.)

  1. What price must Americans pay for a car before the tax is imposed? What price must Americans pay for a car after the tax is imposed?
  2. What price do American producers feel they are receiving for a car before the tax is imposed? What price do American producers feel they are receiving for a car after the tax is imposed?
  3. Before and after the tax is imposed, show in a diagram the gains and losses to all relevant groups of Americans. What is the deadweight loss due to the tax?

Reference no: EM132328693

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