25. Answer the following tax related questions.a. Consider a (per unit) tax on two different goods, X and Y. Good X has very elastic demand, while good Y has veryinelastic demand. Assume the supply curve for each good is the same. If the government wants to minimize deadweightloss, which good should they tax? Answer the question and briefly explain.b. John has been in the habit of mowing Willa's lawn each week for $20. John's opportunity cost is $15, and Willa wouldbe willing to pay $30 to have her lawn mowed. What is the maximum tax the government can impose on lawn mowingwithout discouraging John and Willa from continuing their mutually beneficial arrangement?

In a market where the supply curve is inelastic, the DWL is smaller than the market where the supply…

Answered: 25. Answer the following tax related…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Question 22 If the goal is to have the smallest deadweight loss, then a $1 tax should be imposed upon: a a market with highly elastic demand and highly elastic supply. b a market with highly inelastic demand and highly inelastic supply. c a market with highly elastic demand and unit elastic supply. d a market with unit elastic demand and unit elastic supply.
The following graph represents the demand and supply for blinkies (an imaginary product). The black point (plus symbol) indicates the pre-tax equilibrium. Suppose the government has just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario. PRICE (Dollars per blinkie) 26.00 18.00 10.00 Demand Result Per-unit tax B D F 33 U 20 E 36 QUANTITY (Blinkies) Complete the following table, given the information presented on the graph. $ Price consumers pay before tax $ Equilibrium quantity before tax Supply Value In the following table, indicate which areas on the previous graph correspond to each concept. Check all that apply. Concept Producer surplus after the tax is imposed Consumer surplus after the tax is imposed Tax revenue after the tax is imposed A U B 0 0 с 0 0 D 0 0 E 0 F 0 0
In the market for candy, researchers have estimated the following demand and supply curves. Demand: P= 8 - Q/100 Supply: P= (3Q)/700 If the government imposes an excise tax of $0.50 per unit. What is tax revenue out of this tax? (Remember that the tax does not change the demand and supply curves).
Suppose a local government votes to impose an excise tax of $0.90 per bottle on the sales of bottled water. (Assume that all bottles are identical and residents cannot shop elsewhere.) Before the tax the equilibrium price and quantity are $1.20 and 2000 bottles per day. After the tax is imposed, market equilibrium adjusts to a price of $1.70 and quantity of 1300 bottles per day. a. Draw the supply and demand diagram before and after the excise tax is imposed. 1.) Using the line drawing tool, plot the original and new supply curves and label the lines properly. 2.) Using the point drawing tool, indicate the original and new equilibrium points and label these points properly. Carefully follow the instructions above, and only draw the required objects. Price ($ per bottle) 3.00 2.80- 2.60- 2.40- 2.20- 2.00- 1.80- 1.60- 1.40- 1.20- 1.00- 0.80- 0.60- 0.40- 0.20- 0.00+ 0 1000 2000 Quantity (bottles per day) 10 3000
Briefly explain (3-5 sentences) why it usually makes sense for the government to impose taxes on markets (and products) that have an inelastic demand instead of markets with an elastic demand.
Consider the market for BP gasoline. If the market has a very elastic supply and a very inelastic demand, how would the burden of a tax on BP gasoline be shared between producers and consumers? Draw a graph to support your answer.
3. Use the graph and the inverse demand equation (P=50 - .5Q), inverse supply equation (P=0.333Q) with a subsidy of s=10 given to sellers instead of a tax. The inverse supply equation with the subsidy is (P = 0.333Q –s): a. Illustrate and calculate CS, PS and TS after the subsidy (TS after the subsidy – cost of subsidy) b. Explain what happens to CS, PS and TS with the subsidy. Did the subsidy result to DWL?
Attached is a graph diagram depicting the market for soft drinks. If an excise tax equal to $1 per liter is levied on soft drink sellers, please answer the following questions: a. The new equilibrium quantity of soft drinks bought and sold would be ___________ million liters. b. The new equilibrium price paid by buyers of soft drinks would be $__________ per liter. c. The new equilibrium price received by sellers (after-tax) would be $__________ per liter.
Suppose that the U.S. government decides to charge cola producers a tax. Before the tax, 15 million cases of cola were sold every month at a price of $7 per case. After the tax, 9 million cases of cola are sold every month; consumers pay $10 per case, and producers receive $4 per case (after paying the tax). A. The amount of the tax on a case of cola is ___ per case B. Of this amount, the burden that falls on consumers is ___ per case C. and the burden that falls on producers is ___ per case True or False: The effect of the tax on the quantity sold would have been the same as if the tax had been levied on consumers.
The accompanying graph depicts a hypothetical market for salt. Suppose that an excise or commodity tax is levied on consumers in an attempt to curb blood pressure problems. Show the effect of the tax by shifting the appropriate curve(s). Macmillan Learning Who has the larger tax burden? Consumers (buyers) Producers (suppliers) The tax burdens are equal Why is the tax burden as you described in in the question above? Consumers are the ones paying the tax. Demand is less elastic than supply. Both supply and demand are perfectly elastic. Supply is less elastic than demand. Demand is more elastic than supply. Price (S/kilogram) 9 3 Market for Salt D 4 5 Quantity (in kilograms). S 10
Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss? The greater are the price elasticities of supply and demand, the greater is the deadweight loss. The greater is the price elasticity of supply and the smaller is the price elasticity of demand, the greater is the deadweight loss. The smaller are the decreases in quantity demanded and quantity supplied, the greater the deadweight loss. The smaller is the wedge between the effective price to sellers and the effective price to buyers, the greater is the deadweight loss.
Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for champagne, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per case) 50 45 40 35 30 25 20 15 10 5 0 0 Supply Demand 8 16 24 32 40 48 56 64 72 80 QUANTITY (Cases) Graph Input Tool Suppose the government imposes a $10-per-case tax on suppliers. At this tax amount, the equilibrium quantity of champagne is Market for Champagne Quantity (Cases) Demand Price (Dollars per case) Tax (Dollars per case) 32 30.00 10.00 Supply Price (Dollars per case) cases, and the government collects $ 20.00 in tax revenue.

SEE MORE QUESTIONS

Recommended textbooks for you

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…

Economics

ISBN:

9781259290619

Author:

Michael Baye, Jeff Prince

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS