tax and consumer surplus practice

tax and consumer surplus practice - 1 Consider the market...

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2 Consider the market for shrimp as summarized on the previous page. 1. Suppose there is no tax. a. What is the size of the producer surplus? b. What is the size of the consumer surplus? c. What is the total surplus? 2. Suppose that the government taxes buyers of shrimp $5 for each pound of shrimp purchased. a. What is the market price of shrimp? b. Relative to the no tax case, how much more does a pound of shrimp cost consumers (including the tax)? c. Relative to the no tax case, how much less does the producer earn for each pound of shrimp produced (including the tax)? d. What share of the tax is paid by producers and what share is paid by consumers? e. Relative to the no tax case, how many fewer pounds of shrimp are produced and consumed? f. What is consumer surplus? g. What is producer surplus? h. How much government revenue is collected? i. What is the deadweight loss? j. What is the sum of consumer surplus, producer surplus, government revenue and deadweight loss? Notice that this should be the same as 1.c.
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This note was uploaded on 04/07/2008 for the course ECON 110 taught by Professor Gormely during the Spring '08 term at Kansas State University.

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tax and consumer surplus practice - 1 Consider the market...

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