Laser Printer and Government Intervention Case Study

Laser Printer and Government Intervention - Case register ExampleIn other words, this is delineate by the area a+b+c+d. On the other hand, the producers surplus is represented by the variation between the marginal cost of production and the revenue earned (P1). This is the area f+g+h. The producer surplus corresponds to the profits deduction the fixed cost. However, production of Q results into externality effects such(prenominal) as lack of market for the home produced cartridges. This is represented by the Marginal External Cost (MEC). Considering that such costs do not change, then it means that the entire cost to the society regarding the production of Q is the marginal society curve, as represented by manuscript = MPC + MEC. Q1, which is an external cost, corresponds to the area c + d + e + f + g + h. The intervention of the Kuwait government through the imposition of tax on the import cartridges is aimed at internalizing the externality, which is arrived at after taking cons ideration the external cost of production (Barthold 133).If the government imposes a constant importation tax on all(prenominal) unit of cartridge imported so that this raises the cost of production, which corresponds to the MSC curve, then it means that the new market will be represented by P2 and Q2. subvert quantity and a higher price will occur as a result of the government regulation. Area (a) is the consumer surplus at the new counterpoise and (h) is the producer surplus. Area b + c + f represent the government tax collection. The taxs deadweight loss (DWL) is represented by d+g. Nonetheless, b + c + f, is the external cost, which is avoided. This means that the net benefit from the government intervention is d + e + g - d - g = e 0, which is MEC-DWL. To find forbidden whether the imposed tax is really efficient, then a benefit-cost analysis should be conducted. Assuming that the producers are supposed to pay extra tax, their surplus will be represented by the area (b), i n which case area c + f + h is the elevated production costs resultingfrom the government intervention. As the turnout decreases from Q1 to Q2, some jobs are lost, though more jobs are gained when the home industries employ more people (Barthold 135).