The market for pizza is characterized by a downward-sloping demand curve and an upward-sloping supply curve. a. Draw the competitive market equilibrium. Label the price, quantity, consumer surplus, and producer surplus. Is there any deadweight loss?

The market for pizza is characterized by a downwardsloping demand curve and an upward-sloping supply
curve.
a. Draw the competitive market equilibrium. Label
the price, quantity, consumer surplus, and producer
surplus. Is there any deadweight loss? Explain.
b. Suppose that the government forces each pizzeria
to pay a $1 tax on each pizza sold. Illustrate the
effect of this tax on the pizza market, being sure
to label the consumer surplus, producer surplus,
government revenue, and deadweight loss. How
does each area compare to the pre-tax case?
c. If the tax were removed, pizza eaters and sellers
would be better off, but the government would lose
tax revenue. Suppose that consumers and producers voluntarily transferred some of their gains to
the government. Could all parties (including the
government) be better off than they were with a
tax? Explain using the labeled areas in your graph.