Laser Printer and Government Intervention Case Study

Laser Printer and Government handling - Case Study ExampleIn other words, this is delineate by the theatre of operations a+b+c+d. On the other hand, the producers trim 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 minus the fixed cost. However, production of Q results into externality effects such 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 meat that the entire cost to the society regarding the production of Q is the marginal society curve, as represented by MSC = MPC + MEC. Q1, which is an external cost, corresponds to the area c + d + e + f + g + h. The preventative of the Kuwait governance through the imposition of revenue enhancement on the imported cartridges is aimed at internalizing the externality, which is arrived at after takin g consideration the external cost of production (Barthold 133).If the government imposes a constant importation tax revenue on every unit of cartridge imported so that this raises the cost of production, which corresponds to the MSC curve, then it substance that the new market will be represented by P2 and Q2. Lower quantity and a higher(prenominal) price will occur as a result of the government regulation. Area (a) is the consumer surplus at the new equilibrium 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 out 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 a rea (b), in which case area c + f + h is the elevated production costs resultingfrom the government intervention. As the output decreases from Q1 to Q2, some jobs are lost, though to a greater extent jobs are gained when the home industries employ more people (Barthold 135).