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What will happen to consumer and producer surplus and deadweight loss if the government imposes a tax on sellers for each radio they produce to raise government income?

This will result in the buyer paying a higher price for the radio, and the seller selling less radios due to the increase in price.

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Let's take a look the effect of taxes on buyers and sellers. Typically, a tax is imposed on either the buyer or the seller, depending on the country. For example, the United States usually imposes taxes on the buyer. Canada usually imposes taxes on the seller. If the amount of tax imposed on the seller increases, the amount of money the buyer pays for the radio also increases. This, in turn, will result in a decrease in buyer demand for radios. The law of supply and demand does not address tax specifically because the only thing that matters to the buyer is the total amount paid for the product. On the other hand, the only thing that matters to the seller is the amount of net profit will be made from each sale. An increase in the amount of taxes the government imposes on sellers for each radio produced would result in a decrease in the number of radios (or supply) made available to buyers. On the other hand, this would also result in an increase in the price that buyers would have to...

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jwcoop59 | Student

If the government imposes a tax on the sellers of radios, they will obviously need to increase the prices of their goods to make up for the loss in profit. This increase in price will deter individuals from purchasing the product which will cause an increase in deadweight loss as fewer people are interested in purchasing the radios.

At the same time, with fewer purchasers, the radio sellers will begin receiving less profit than before, even though they have adjusted the margin to be making the same per product as before. Because of this, producer surplus will fall as well. Sellers will be receiving less money as fewer people buy the product, and so their overall profit above equilibrium (which is the producer surplus) will decrease.