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Suppose the government imposes an excise tax on mountain bikes. The black line on the following graph shows the tax wedge created by a tax
Suppose the government imposes an excise tax on mountain bikes. The black line on the following graph shows the tax wedge created by a tax of $20 per bike. 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 100 90 Tax Revenue 80 Demand 70 60 sumer Surplus PRICE (Dollars per bike) Tax Wedge 40 Supply Producer Surplus + 20 Deadweight Loss 10 0 0 100 200 300 800 900 1000 400 500 600 700 QUANTITY (Bikes) 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. After Tax Before Tax (Dollars) (Dollars) Consumer Surplus Producer Surplus Tax Revenue 0 Deadweight Loss 0
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