1. Taxes and Efficiency Suppose the government is thinking about levying a per-unit tax of $100 on firms supplying either gaming consoles or internet routers. The supply curves for both of the two goods are identical, as given by the following graphs. The demand for gaming consoles is given by Do (on the first graph), and the demand for internet routers is given by DR (on the second graph). Suppose the government decides to tax gaming consoles. The following graph plots the yearly demand and supply for this good. It also plots another supply curve (S + Tax) shifted upward by the proposed tax amount ($100 per console). On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for gaming consoles. Then use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. (? Gaming Consoles Market 240 220 Supply 200 S+Tax Tax Revenue Deadweight Loss 8 8 8 8 6 8 8 PRICE (Dollars per console) Do 50 100 150 200 250 300 350 400 450 500 550 600 QUANTITY (Consoles) Suppose the government decides to tax internet routers, instead. The following graph plots the yearly supply and demand curves for this good, as well as another supply curve shifted upward by the proposed tax amount ($100 per router) On the following graph, perform the same exercise that you did on the graph for gaming consoles. Use the green rectangle (triangle symbols) to shade the area that represents tax revenue for internet routers. Then, use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. Internet Routers Market 240 220 Supply 200 S+ Tax Tax Revenue Deadweight Loss PRICE (Dollars per router) - 8 8 8 8 8 8 5 8 50 100 150 200 250 300 350 400 450 500 650 800 QUANTITY (Routers) Complete the following table by entering the tax revenue collected and deadweight loss caused by each of the two tax proposals. Tax Revenue Deadweight Loss If the Government Taxes... ( Dollars) ( Dollars) Gaming consoles at $100 per console Internet routers at $100 per router If the goal of the government is to impose the tax that is more efficient, it should tax V . (Hint: Assume the administrative burdens of the two tax laws are equal.)