(Transcript of audio with descriptions. Transcript includes narrator headings and description headings of the visual content)
(Speaker)
In this question you are asked to identify how the tax benefits American automakers but also which groups are harmed by the tax.
(Description)
The graph from part B is shown.
(Speaker)
Recall that the tax raised the price of imported trucks to 31 thousand dollars and suppliers of imported trucks only receive 20 thousand dollars per truck.
It's fairly clear that foreign suppliers are hurt by the tax. American producers will benefit as some consumers will shift consumption away from the more expensive imported truck to the domestically produced truck.
In our graph, we've highlighted in blue the consumer surplus that is lost from domestic residents paying higher prices or not purchasing the truck entirely.
(Description)
This area is represented by a four-sided figure which has the following vertices.
The first vertex is a point with coordinates, 0 and 30 thousand dollars.
The second vertex is a point with coordinates, 0 and 31 thousand dollars.
The third vertex is a point with coordinates, 200 thousand and 31 thousand dollars.
The fourth vertex is a point with coordinates, 300 thousand and 30 thousand dollars.
The area is briefly highlighted in blue and labeled as Fall in consumer surplus due to tax.
(Speaker)
The producers surplus lost by foreign suppliers is highlighted in red.
(Description)
This area is represented by a four-sided figure which has the following vertices.
The first vertex is a point with coordinates, 0 and 28 thousand dollars.
The second vertex is a point with coordinates, 0 and 30 thousand dollars.
The third vertex is a point with coordinates, 300 thousand and 30 thousand dollars.
The fourth vertex is a point with coordinates, 200 thousand and 28 thousand dollars.
The area is briefly highlighted in red and labeled as Fall in producer surplus due to tax.
(Speaker)
It's important to note that a portion of the lost consumer and producer surplus will shift to the government.
In this graph, we highlight the portion of consumer and producer surplus that goes to the government as revenue.
(Description)
This area is represented by a rectangle with the following vertices.
The first vertex is a point with coordinates, 0 and 28 thousand dollars.
The second vertex is a point with coordinates, 0 and 31 thousand dollars.
The third vertex is a point with coordinates, 200 thousand and 31 thousand dollars.
The fourth vertex is a point with coordinates, 200 thousand and 28 thousand dollars.
The area is briefly highlighted in gray and labeled as A portion of the lost consumer and producer surplus shows up as government revenue.
(Speaker)
Because the tax will increase the price some consumers will still purchase the truck. In this case there is not a net loss as the difference in the price paid by consumers and received by suppliers will go to the government as revenue.
But some consumers will no longer purchase the imported trucks at a higher price, thus inefficiency arises because some mutually beneficial transaction no longer occurs due to the higher prices of trucks.
(Description)
The corresponding area is a triangle with the following vertices.
The first vertex is a point with coordinates, 200 thousand and 28 thousand dollars.
The second vertex is a point with coordinates, 200 thousand and 31 thousand dollars.
The third vertex is a point with coordinates, 300 thousand and 30 thousand dollars.
This area is briefly highlighted in yellow and labeled as The portion of consumer and producer surplus that is lost from the tax, i.e, deadweight loss.