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There has been rumours that the government is developing a secret plan to tax mango producers. The tax t will be in $ per kilo

There has been rumours that the government is developing a secret plan to tax mango producers. The tax t will be in $ per kilo of mangoes. A whistle blower has stolen the diagram shown in Figure 1. The variable P is measured in $ per kilo of mangoes and the variable Q is measured in kilos of mangoes per hour.

You are required to answer the following questions in your role of detective economist for an important news corporation.

  1. What is the pre-tax equilibrium price of mangoes? [5 marks]
  2. What is the price paid by consumers (buyers) after the tax has been introduced? [5 marks]
  3. What is the price received by producers (sellers) after the tax has been introduced? [5 marks]
  4. What is the burden on consumers? [7.5 marks]
  5. What is the burden on producers? [7.5 marks}
  6. What is the value of the tax t expressed in $ per kilo of mangoes? [10 marks]

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