4. The Laffer curve 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 cigarettes, 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 pack) 20 18 16 14 Supply Demand 0 20 40 60 80 100 120 140 160 180 200 QUANTITY (Packs) Suppose the government imposes a $4-per-pack tax on suppliers. At this tax amount, the equilibrium quantity of cigarettes is Graph Input Tool Market for Cigarettes Quantity (Packs) Demand Price (Dollars per pack) Tax (Dollars per pack) 80 12.00 4.00 Supply Price (Dollars per pack) packs, and the government collects $ (?) 8.00 in tax revenue.

4. The Laffer curve 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 cigarettes, 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 pack) 20 18 16 14 Supply Demand 0 20 40 60 80 100 120 140 160 180 200 QUANTITY (Packs) Suppose the government imposes a $4-per-pack tax on suppliers. At this tax amount, the equilibrium quantity of cigarettes is Graph Input Tool Market for Cigarettes Quantity (Packs) Demand Price (Dollars per pack) Tax (Dollars per pack) 80 12.00 4.00 Supply Price (Dollars per pack) packs, and the government collects $ (?) 8.00 in tax revenue.

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Application: The Cost Of Taxation

Section: Chapter Questions

Problem 10PA

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9. Effect of a tax on buyers and sellers The following graph shows the daily market for shoes when the tax on sellers is set at $0 per pair. Suppose the government institutes a tax of $23.20 per pair, to be paid by the seller. 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. Hint: To see the impact of the tax, first enter the value of the tax in the Tax on Sellers field. Adjust the value in the price field to move the green line to the after-tax equilibrium so that quantity demanded equals quantity supplied. Graph Input Tool Market for Shoes 200 180 I Price (Dollars per pair) $100 160 Quantity Demanded (Pairs of shoes) Quantity Supplied (Pairs of shoes) Supply 250.00 250.00 140 120 100 Supply Shifter 80 Demand Tax on Sellers (Dollars per pair) 60 0.00 40 20 50 100 150 200 250…
4. The Laffer curve 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. BRUNENSE 8 5 1000 Suppose the government imposes a $10-per-case tax on suppliers. At this tax amount, the equilibrium quantity of champagne is - 700 400 500 430 300 200 100 1000 Now calculate the government's tax revenue if it sets a tax of $0, $10, $20, $25, $30, $40, or $50 per case. (Hint: To find the equilibrium quantity after the tax, adjust the "Quantity"field until the Tax equals the value of the per-unit tax.) Using the data you generate, plot a…
President Biden has proposed a $2.2 trillion Infrastructure package to repair roads and bridges. Some policy analysts think that at least one part of the funding will be an increase in the federal excise tax on gasoline. Suppose the size of this increase in excise tax is written as t. Using a graph analyze and explain the impact of this t dollars per gallon increase in excise tax on gasoline. Which of the curve(s), if any, would shift, and why? Graphically, show the new equilibrium price and quantity (labeling it P1 and Q1). At the new equilibrium, please determine how much of the tax increase was borne by gasoline consumers and how much was absorbed by gasoline sellers? Indicate the incidence of taxation for both consumers and sellers on the graph and explain. What will determine whether consumers or sellers will bear a higher relative burden of taxation? Please explain in detail.
3) A tax on gasoline is proposed in order to raise money for the pollution-control activities of several public agencies. The tax will be 10¢ per gallon, and last year 10.3 million gallons of gasoline were used by motorists (this is strictly an illustrative number). Does this mean that we can anticipate S1,030,000 in revenues from this tax? Explain and use a graph to answer this question.
4. The Laffer curve 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 gin, 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. Graph Input Tool Market for Gin 100 I Quantity (Bottles Demand Price (Dollars per bottle) 90 Supply 56 80 Şupply Price (Dollars per bottle) 60.00 40.00 70 Tax Dollars per bottle) 20.00 * 60 50 40 30 Demand 20 10 0 14 28 42 56 70 84 98 112 126 140 QUANTITY (Bottles) Suppose the government imposes a $20-per-bottle tax on suppliers. At this tax amount, the equilibrium quantity of gin is bottles, and the government collects S in tax revenue. Now calculate the…
4. The Laffer curve 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 gin, 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 bottle) 100 90 80 20 10 0 0 Supply Demand 14 28 42 56 70 84 98 112 126 140 QUANTITY (Bottles) Graph Input Tool At this tax amount, the equilibrium quantity of gin is Market for Gin Suppose the government imposes a $20-per-bottle tax on suppliers. Quantity (Bottles) Demand Price (Dollars per bottle) Tax (Dollars per bottle) 56 60.00 20.00 Supply Price (Dollars per bottle) bottles, and the government collects $ ? 40.00 in tax revenue.
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