36 Supply I Quantity (Bottles) 48 32 Demand Price (Dollars per bottle) Şupply Price (Dollars per bottle) 24.00 16.00 28 Tax Wedge 8.00 24 (Dollars per bottle) 20 16 12 Demand 4 O 12 24 36 48 60 72 84 s6 108 120 QUANTITY (Bottles) Suppose the government imposes an $8-per-bottle tax on suppliers. At this tax amount, the equilibrium quantity of rum is [ ] bottles, and the government collects in tax revenue. Now calculate the government's tax revenue if it sets a tax of $0, $8, $16, $20, $24, $32, or $40 per bottle. (Hint: To find the equilibrium quantity after the tax, adjust the "Quantity" field until the Tax Wedge equals the value of the per-unit tax.) Using the data you generate, plot a Laffer curve by using the green points (triangle symbol) to plot total tax revenue at each of those tax levels. Note: Plot your points in the order in which you would like them connected. Line segments vill connect the points automatically. 960 PRICE (Dollars per botte)
36 Supply I Quantity (Bottles) 48 32 Demand Price (Dollars per bottle) Şupply Price (Dollars per bottle) 24.00 16.00 28 Tax Wedge 8.00 24 (Dollars per bottle) 20 16 12 Demand 4 O 12 24 36 48 60 72 84 s6 108 120 QUANTITY (Bottles) Suppose the government imposes an $8-per-bottle tax on suppliers. At this tax amount, the equilibrium quantity of rum is [ ] bottles, and the government collects in tax revenue. Now calculate the government's tax revenue if it sets a tax of $0, $8, $16, $20, $24, $32, or $40 per bottle. (Hint: To find the equilibrium quantity after the tax, adjust the "Quantity" field until the Tax Wedge equals the value of the per-unit tax.) Using the data you generate, plot a Laffer curve by using the green points (triangle symbol) to plot total tax revenue at each of those tax levels. Note: Plot your points in the order in which you would like them connected. Line segments vill connect the points automatically. 960 PRICE (Dollars per botte)
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Governments often place so-called sin taxes on goods or services such as cigarettes and alcohol. These kinds of taxes are popular with politicians because they are usually more palatable to voters than income taxes.
To understand the effect of such a tax, consider the monthly market for rum, which is shown on the following graph.
NOTE: the fill in blank options are (increases by a greater and greater amount, increases and then decreases, or increases at a constant rate)
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