Question 1

Refer to the graph showing the market for frisbees before and after a tax is imposed. If the equilibrium price before the tax is $$6.00 and after the tax is 6.60$$, what is the buyers' share of the tax per frisbee?

Accepted Answer

$0.60

Question 2

Based on the graph, what is the total tax per frisbee imposed on the market?

Accepted Answer

$1.00

Question 3

Using the graph, if the price received by sellers after the tax is $5.60, what is the sellers' share of the tax per frisbee?

Accepted Answer

$0.40

Question 4

If the government collects a tax of $$1.00 per frisbee, and 4,000 frisbees are sold after the tax, what is the total tax revenue collected by the government?

$$ 	ext{Tax Revenue} = 	ext{Tax per unit} 	imes 	ext{Quantity sold} $

Accepted Answer

$4,000

Question 5

According to the graph, what is the deadweight loss caused by the tax? (Assume the reduction in quantity from 5,000 to 4,000 frisbees and a tax of $$1.00 per frisbee. Use the formula for deadweight loss: $$ 	ext{DWL} = \frac{1}{2} 	imes 	ext{Tax} 	imes 	ext{Reduction in Quantity} $)

Accepted Answer

$500

Microeconomics Exam Study Guide: Elasticity, Market Structures, and Labor Markets

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