Suppose that the equilibrium quantity in the market for widgets has been 200 per month. Then a tax of $5 per widget is imposed on widgets. The price paid by buyers increases by $2 and the after-tax price received by sellers falls by $3. The government is able to raise $750 per month in revenue from the tax. The deadweight loss from the tax is

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To calculate the deadweight loss from the tax, we first need to understand the effects of the tax on the market for widgets.

1. Start with the initial equilibrium: Before the tax, the market equilibrium quantity of widgets is 200 per month.

2. Imposing the tax: The tax of $5 per widget is imposed on each unit sold. This means that both buyers and sellers are affected by the tax.

3. Increase in price paid by buyers: The price paid by buyers increases by $2 due to the tax. This means that the buyers have to pay an additional $2 per widget on top of the original price.

4. Decrease in price received by sellers: The after-tax price received by sellers decreases by $3. This means that the sellers receive $3 less per widget than they were receiving before the tax.

5. Government revenue: The government is able to raise $750 per month in tax revenue. We can calculate the number of widgets sold per month that generates this revenue by dividing the revenue by the tax rate: $750 / $5 = 150 widgets.

Now, let's calculate the new equilibrium quantity after the tax:

6. Calculating the new equilibrium quantity: To find the new equilibrium quantity, we need to find the quantity at which the quantity demanded equals the quantity supplied after the tax has been imposed.

Demand: The quantity demanded after the tax is imposed can be found by subtracting the increase in price paid by buyers from the initial demand: D = 200 - 2 = 198.

Supply: The quantity supplied after the tax is imposed can be found by subtracting the decrease in price received by sellers from the initial supply: S = 200 - 3 = 197.

The new equilibrium quantity after the tax is the lower of the quantity demanded and the quantity supplied, which is 197 in this case.

Now, let's calculate the deadweight loss:

7. Deadweight loss: Deadweight loss is the loss in economic efficiency due to a tax or other market distortion. In this case, the deadweight loss can be calculated by finding the difference between the initial equilibrium quantity (200) and the new equilibrium quantity (197). Therefore, the deadweight loss from the tax is 200 - 197 = 3 widgets per month.

So, the deadweight loss from the tax is 3 widgets per month.