Figure 1. Market for ice creams (Quantity per hour)

Based on the figure 1 above, answer the following questions:

1. If the market for ice cream is in equilibrium what is the area corresponding to consumer surplus and the area corresponding to producer surplus? (2 Marks)
2. If a tax of $4 is applied in this market what is the price consumers pay? What is the price sellers receive? (2 marks)
3. With a tax of $4, what are the areas corresponding to consumer surplus and producer surplus? What is the area of deadweight loss (DWL)? (3 Marks)
4. Calculate the revenue the government raises from the $4 tax in this market? (1 Mark)
5. Overall how would you determine if people are better off after the tax? Briefly explain. (2 Marks)

Price (\$) Price (\$)