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Unformatted text preview: market as a result of the tax. Answer : The tax shifts the supply curve up by $2. The new equilibrium price is $6 and quantity is 2,000/week. Consumer surplus is now 0.5 (8 - 6) (2,000) = $2,000/week. Net of the tax, sellers receive a price of $4 per unit. Producer surplus is now 0.5 (4 - 2) (2,000) = $2,000/week. The tax revenue collected is ($2/unit)(2,000 units/wk) = $4,000/week. The efficiency loss is the area between the demand and supply curves between the new and the old quantities: 0.5 (6 - 4) (3,000 - 2,000) = $1,000/week....
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This note was uploaded on 02/20/2012 for the course ECON 202 taught by Professor Brightwell during the Spring '08 term at Texas A&M.
- Spring '08
- Producer Surplus