2. Use Exhibit 3, which shows the market for music CDs, to answer the following questions.

a. Complete the table. (Note: To calculate deadweight loss, the area of a triangle is 1/2 base x height).

b. Tax per unit Tax revenue collected $ 0 3 6 9 12 Deadweight loss 15 18 As the tax is increased, what happens to the amount of tax revenue collected? Why?

c. At a tax of $18 per CD, how much tax revenue is collected? Why?

d. If the government wanted to maximize tax revenue, what tax per unit should it impose?

c. If the government wanted to maximize efficiency (total surplus), what tax per unit should it impose?

f. What happens to the deadweight loss due to the tax as the tax is increased? Why?