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Q3 TAXES, TOTAL SURPLUS AND DEADWEIGHT LOSS Suppose that the market for electricity is a competitive market and is described by the following supply and demand functions: Demand: QD=802P Supply: QS=10+0.5P a. Calculate the equilibrium price and quantity and draw a diagram to illustrate your answer. b. Show on your diagram and calculate the size of the: (i) Consumer surplus (ii) Producer surplus (iii) Total Surplus c. Now suppose that generators mainly use coal to produce electricity. Assume that the government wants to reduce CO2 emission by imposing a tax on generators (e.g. a carbon tax). In order to reduce the CO2 emission, the government wants to decrease the consumption of electricity to 6MWh (Megawatt hours). What size specific (per unit) tax will the government impose on electricity generators to achieve this outcome? d.What is the per unit incidence or burden of the tax experienced by consumers? e.What is the per unit incidence or burden of the tax experienced by producers? f. What is the total amount of tax revenue raised by the per unit tax and how much of the total tax revenue is paid by (i) consumers and (ii) producers? g.According to the supply and demand model is society worse off or better of as a result of the imposition of the per unit tax? Explain your answer. h. What determines the incidence of the tax? i.Under what conditions will the consumer pay a greater proportion of the tax