Please provide full explanations - I have the answers! Thank You! Refer to Figur
ID: 1213453 • Letter: P
Question
Please provide full explanations - I have the answers! Thank You!
Refer to Figure: Supply and Demand. Assume this represents the supply and demand of a gallon of soda. In order to raise revenue, the government imposes a $2 per gallon tax on consumers. What is the new equilibrium market price and quantity after the tax? (use the closest whole numbers)
a. $5, 6 units b. $6, 7 units c. $7, 6 units d. $6, 5 units
Refer to Figure: Supply and Demand. By how much does total surplus change from before to after the tax assuming there is NO negative externality to soda consumption?
a. $12 b. $1 c. $36 d. $6
Refer to Figure: Supply and Demand. How much of the soda tax is borne by consumers? a. $2 b. $0 c. $1.50 d. $1
Refer to Figure: Supply and Demand. Assume soda consumption imposes a $2 negative externality per gallon because it causes obesity. If true then, a. A $2 tax on soda would increase total surplus b. A $2 tax on soda causes a deadweight loss c. A $2 tax on soda would internalize the externality but that gain would be offset by the deadweight loss d. None of the above are correct.
Figure: Supply and Demand 15 Price $ 10 0 5 10 Quantity (gallons)Explanation / Answer
Initial equilibrium: P=$6 and Q=7
After tax: P=$5 (recieved by producers) and P=$7 (paid by consumers) and Q=6
Therefore, correct option: (a) $5,6 units
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Fall in total surplus= Deadweight loss because of tax = (1/2)(Tax amount)(New Q) = (1/2)(2)(6) = 6
Therefore, correct option: (d) 6
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Tax borne by consumers = New price - Old price = $5-$5 = $1
Therefore, correct option: (d) $1
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Correct option: c. A $2 tax on soda would internalize the externality but that gain would be offset by the deadweight loss
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