QUESTION 14 1 points Ken places a $20 value on a cigar and Mark places a $17 val

Question

QUESTION 14 1 points Ken places a $20 value on a cigar and Mark places a $17 value on it. The equilibrium price for this brand of cigar is $15. Suppose the government levies a tax of $3 on each cigar, raising the equilibrium price of the cigar to $18. Because consumer surplus has O fallen by more than the tax revenue, the tax has a deadweight loss. O fallen by less than the tax revenue, the tax has no deadweight loss. O fallen by exactly the amount of the tax revenue, the tax has no deadweight loss. O increased by less than the tax revenue, the tax has a deadweight loss increased by more than the tax revenue, the tax has no deadweight loss QUESTION 15 1 points

Explanation / Answer

14. Ans: Fallen by exactly the amount of the tax revenue, the tax has no deadweight loss.

Explanation:

Consumer surplus before tax = ($20 + $17) - ($15 * 2) = $7

Consumer surplus after tax = ($20 + $17) - ($18 * 2) = $1

So, Consumer surplus fallen by $7 - $1 = $6

Tax revenue = $3 * 2 = $6

Thus, the tax revene = Loss in consumer surplus = $6.

15. Ans: $6

Explanation:

Tax revenue = $3 * 2 = $6

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.