1. Understanding the implications of taxes on welfare The following graph represents the demand and supply for blinkies (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 560Omm who won a B 48.00 PRICE (Dollars per blinkle) 40.00 30 AO QUANTITY (Blinkies) Q Search'i 30 ' 740 i l QUANTITY (Blinkies) / Complete the following table, given the information presented on the graph. Result Value Price consumers pay before tax 8 Equilibrium quantity before tax ' Perunit tax ' ' In the following table, indicate which areas on the prewous graph correspond to each concept. Check all that apply. l Concept A B C D E i N F 1, Consumer surplus before the tax is imposed [j C] C} C] D [j ; Producer surplus after the tax is imposed ' [:1 D C} D D ' [j j Deadweight loss after the tax IS Imposed C! D, C] [j C! D l' Grade it Now Save & Continue Continue without saving 2. Taxes and welfare Consider the market for designer handbags. The following graph shows the demand and supply for designer handbags before the government imposes any taxes. First, use the black point (plus symbol) to indicate the equilibrium price and quantity of designer handbags 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 400 -+ 360 Equilibrium 320 Demand A 280 240 Consumer Surplus PRICE (Dollars per handbag) 200 160 Supply Producer Surplus 120 80 40 100 200 300 400 500 600 700 800 900 1000 Q Search myhp 3 2 hpSuppose the government imposes an excise tax on designer handbags. The black line on the following graph shows the tax wedge created by a tax of $80 per handbag. 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 360 Tax Revenue 320 Demand A 28 Consumer Surplus 240 200 Tax Wedge PRICE (Dollars per handbag 160 Producer Surplus Supply 120 Deadweight Loss 40 0 100 200 300 400 500 600 700 800 900 1000 QUANTITY (Handbags) Q SearchHomework (Ch 08) 200 Tax Wedge 160 Producer Surplus PRICE (Dollars p Supply 120 Deadweight Loss 40 100 200 300 400 500 600 700 800 900 1000 QUANTITY (Handbags) Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax, and 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 Deadweight Loss Grade It Now Save & Continue Continue without saving Q Search myhp