Asked by Kylie Scott on May 31, 2024
Verified
The number of seats in a football stadium is fixed at 70,000.The city decides to impose a tax of $10 per ticket.In response,the team management raises the ticket price from $30 to $40 and still sells all 70,000 tickets.The tax caused a change in the consumer surplus of _____,a change in the producer surplus of _____,and a deadweight loss of _____.
A) -$10;$0;$10
B) -$700,000;$0;$700,000
C) -$10;$0;$0
D) -$700,000;$0;$0
Consumer Surplus
The difference in the total amount consumers are capable of paying for a good or service versus what they really pay.
Producer Surplus
The divergence between what producers expect to get for a good or service and the actual compensation they receive.
Deadweight Loss
The loss of economic efficiency when the equilibrium outcome is not achievable or not achieved in a market.
- Explore the influence of excise taxes on the excess benefits received by consumers and producers.
- Master the concept of burden sharing of taxes between consumers and producers.
- Analyze the impact of a tax on market equilibrium, including quantity and price changes.
Verified Answer
TW
Timisiha WalkerJun 01, 2024
Final Answer :
D
Explanation :
The consumer surplus decreases by $700,000 due to the increase in ticket prices ($10 increase per ticket for 70,000 tickets). The producer surplus does not change because the team still sells all tickets at the higher price, covering the tax. There is no deadweight loss because all tickets are still sold, indicating no loss in efficiency.
Learning Objectives
- Explore the influence of excise taxes on the excess benefits received by consumers and producers.
- Master the concept of burden sharing of taxes between consumers and producers.
- Analyze the impact of a tax on market equilibrium, including quantity and price changes.