The following graph shows the equilibrium price and quantity in the market for chewing gum in the country Argonia. Suppose the government of Argonia passes a bill to impose a tax of $2 on the production of chewing gum.

a. What is the new equilibrium price and quantity?
b. What is the amount of tax revenue earned by the government?
c. What is the deadweight loss of this tax?
d. Which is greater: the loss in consumer surplus or the loss in producer surplus?

Transcribed Image Text:

Price (in $9 Argonian 8 dollars) 6 4 3 2 2 4 6 8 10 12 14 16 18 Quantity (in millions of sticks)