1. Understanding the implications of taxes on welfare The following graph represents the demand and supply for pinckneys (an imaginary product). The black point (plus symbol) indicates the pre-tax equilibrium. Suppose the government has just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario. Demand Supply A 35.00 B 27.50 PRICE (Dollars per pinckney) D 20.00 4.5 QUANTITY (Pinckneys)Complete the following table, given the information presented on the graph. Result Value Price consumers pay before tax Equilibrium quantity after tax Per unit tax In the following table, indicate which areas on the previous graph correspond to each concept. Check all that apply. Concept A B C D E F Deadweight loss after the tax is imposed O O O O O Consumer surplus after the tax is imposed O O O O O O Producer surplus before the tax is imposed O O O O2. Taxes and welfare Consider the market for commercial fans. The following graph shows the demand and supply for commercial fans before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of commercial fans 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.Before Tax 150 135 Demand Equilibrium 120 A 105 Consumer Surplus 90 O 75 PRICE (Dollars per fan) 60 Producer Surplus 45 Supply 30 15 0 70 140 210 280 350 420 490 560 630 700 QUANTITY (Fans)Suppose the government imposes an excise tax on commercial fans. The black line on the following graph shows the tax wedge created by a tax of $60 per fan. 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. After Tax 150 135 Demand Tax Revenue 120 A 105 Consumer Surplus 90 Tax Wedge 75 PRICE (Dollars per fan) Producer Surplus 45 Supply 30 Deadweight Loss 15 0 70 0 210 280 420 490 560 630 700 QUANTITY (Fans)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 O
