11. The Laffer curve Government-imposed taxes cause reductions in the activity that is being taxed, vwhich has important implications for revenue collections. To understand the effect of such a tax, consider the monthly marketr for cigarettes. With no tax, the equilibrium quantity is 70 packs. The following table shows the equilibrium quantity produced and sold in the market for various per unit taxes. Quantity (Dollars per pack) (Packs) Тах 70 4 56 42 10 35 12 28 16 14 20 Suppose the government imposes a $4-per-pack tax on suppliers. At this tax amount, the equilibrium quantity of cigarettes is packs, and the government collects $ in tax revenue.
11. The Laffer curve Government-imposed taxes cause reductions in the activity that is being taxed, vwhich has important implications for revenue collections. To understand the effect of such a tax, consider the monthly marketr for cigarettes. With no tax, the equilibrium quantity is 70 packs. The following table shows the equilibrium quantity produced and sold in the market for various per unit taxes. Quantity (Dollars per pack) (Packs) Тах 70 4 56 42 10 35 12 28 16 14 20 Suppose the government imposes a $4-per-pack tax on suppliers. At this tax amount, the equilibrium quantity of cigarettes is packs, and the government collects $ in tax revenue.
Principles of Macroeconomics (MindTap Course List)
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Chapter6: Supply, Demand, And Government Policies
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Transcribed Image Text:11. The Laffer curve
Government-imposed taxes cause reductions in the activity that is being taxed, vwhich has important implications for revenue collections.
To understand the effect of such a tax, consider the monthly marketr for cigarettes. With no tax, the equilibrium quantity is 70 packs. The following
table shows the equilibrium quantity produced and sold in the market for various per unit taxes.
Quantity
(Dollars per pack) (Packs)
Тах
70
4
56
42
10
35
12
28
16
14
20
Suppose the government imposes a $4-per-pack tax on suppliers.
At this tax amount, the equilibrium quantity of cigarettes is
packs, and the government collects $
in tax revenue.
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