Suppose a Recent Increase in Federal Gasoline Taxes Is Estimated

Essay

Suppose a recent increase in federal gasoline taxes is estimated to cause a $150 million reduction in the total surplus (consumer plus producer surplus) in the gasoline market. If tax revenues increased by $100 million, what is the deadweight loss associated with the tax? As a result of the tax, 10,000 people sold their cars and started riding their bicycles to work. How much of the burden of the deadweight loss is incurred by the bicycle riders?