1 answer

HDTV Price $1 2000 a. Suppose the government imposes a $300 per unit tax. Find the...

Question:

HDTV Price $1 2000 a. Suppose the government imposes a $300 per unit tax. Find the tax wedge on the graph. What is the equili

HDTV Price $1 2000 a. Suppose the government imposes a $300 per unit tax. Find the tax wedge on the graph. What is the equilibrium quantity and price under this tax policy? 1800 1600 1400 1200 1000 800 600 b. What is CS, PS, and TS in this market under the $300 per unit tax? 400 2003 0 2 3 4 5 6 7 8 9 10 HDTV Quantity (in 1,000s) c. How much efficiency is loss as the result of the $300 per unit tax? Show your numerical answer as well as draw on the graph the area of DWL.

Answers

(a) From the graph we can see that the tex wedge is $300 per unit at the quantity = 5000 HDTV . Therefore,the equilibrium quantity after tax= 5000 HDTVs and equilibrium price = $1500.

(b) Consumer surplus under tax = (0.5)(2000-1500)(5000)= $1250000

Producer surplus under tax = (0.5)(1200-200)(5000)= $3250000.

Total surplus under tax = CS+ PS = $(1250000+3250000)= $4500000

(c) Deadweight loss = (0.5)(1500-1200)(6000-5000)= $150000

-Demand HDTV prica ($) ts va Supply Die 1600 Moo (200 lose bos Yoo 200 2 3 4 5 6 7 8 9 10 R.S HDTV Quantity (in looos

.

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