Q = 1,050 – 50P
a) Suppose that the government institutes a $5.50 per-ﬁlm tax on theﬁlm copying industry.
Assuming that the demand for copied ﬁlms is that given above, how will this tax affect the
b) How will the burden of this tax be allocated between consumers and producers? What will be
the loss of consumer and producer surplus?
c) Show that the loss of producer surplus as a result of this tax is borne completely by the ﬁlm
studios. Explain your result intuitively.