Question

For good X, the supply curve is the typical upward-sloping straight line, and the demand curve is the typical downward-sloping straight line. A tax of $15 per unit is imposed on good X. The tax reduces the equilibrium quantity in the market by 300 units. The deadweight loss from the tax is

Answer 1

Answer:

deadwweight loss $2,250

Explanation:

The deadweight loss is the area loss between the new consumer and producer surplus after-taxes and the previous consumer and prodcuer surplus after taxes

As this is a straight line then we have the area of a triangle which height is

P2 - P1 in this case the $15 tax levied

and Q2 - Q1 as the high of the triangle in this case 300 units

We now sovle for the area of the triangle:

300 x 15 / 2 = 2,250