# 1 In The Above Market For Cheese How Much Is The Producer Surplus At The Initial Equ 2866413

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Econ 4020 – Dr. Rupp
Homework#5 – Taxes
Due – Feb 27 (at start of class)
1. In the above market for cheese – how much is the producer surplus at the initial equilibrium
(before a tax is introduced)?
2. Suppose that there is a \$2.50 tax imposed on cheese per pound. Find the new equilibrium price
that buyers will pay for cheese. Label this Pb on your graph. Find the new equilibrium price that
sellers will receive. Label this Ps on your graph. Find the new equilibrium quantity.
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3. Pin stripe the region of the new producer surplus on your graph after the \$2.50 tax is imposed.
Calculate the new region of producer surplus. What has happened to producer surplus after the
tax has been imposed?
4. Calculate the total tax revenue collected from a \$2.50 per pound tax. How much of this tax
revenue is paid by the buyers of cheese? How much is paid by the sellers of cheese?