5. Calculating tax incidenceSuppose that the U.S. government decides to charge beer producers a tax. Before the tax, 25 billion cases of beer were sold every year at a price of$7 per case. After the tax, 19 billion cases of beer are sold every year; consumers pay $8 per case, and producers receive $4 per case (after payingthe tax)The amount of the tax on a case of beer isper case. Of this amount, the burden that falls on consumers isper case, and the burdenthat falls on producers isper caseTrue or False: The effect of the tax on the quantity sold would have been smaller if the tax had been levied on consumersTrueFalse

The amount of tax on a case is calculated as follows.

Answered: 5. Calculating tax incidence Suppose…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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7. Taxes on particular goods discourage their consumption. Economists say that such taxes "distort consumer demands." In terms of the elasticity of demand (or elasticity of supply) for the commodities in question, what sort of goods (in terms of their elasticities) would you choose to tax to achieve the following objectives? Give an example of the type of good/product for each AND explain whether you are referring to the demand curve or the supply curve. a. Collect a large amount of tax revenue b. C. d. Distort demand as little as possible Discourage consumption of harmful commodities Discourage production of polluting commodities
7. Effect of a tax on buyers and sellers The following graph shows the weekly market for craft beer in some hypothetical economy. Suppose the government levies a tax of $23.20 per case. The tax places a wedge between the price buyers pay and the price sellers receive. PRICE (Dollars per case) 100 90 80 70 60 Tax Wedge 50 40 30 20 10 Supply Demand 0 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Cases of craft beer) ? Complete the following table by filling in the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity (Cases of craft beer) Price Buyers Pay (Dollars per case) Price Sellers Receive (Dollars per case) Before Tax After Tax Using your answers from the previous table, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table. Buyers Sellers Tax Burden (Dollars per…
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: 1. Buyers would spend a total of $___________ million on soft drinks. 2. Sellers would receive a total of $____________ million (after-tax) from selling soft drinks. 3. The government revenue from this tax would be $____________ million.
7. Effect of a tax on buyers and sellers Part 2 The following graph shows the daily market for wine. Suppose the government institutes a tax of $10.15 per bottle. This places a wedge between the price buyers pay and the price sellers receive.
2. Suppose the price.elasticity of demand for commödity M is less than one. When a tax is imposed on commodity Mproduetion, it changes the price, quantity, and consumer speņding in which of the following ways? - Price Quantity Spending Irierease Decrease Decreàse. Therease Ancrease a. Increase- b. -Deerease Decrease Decrease Decrease - Decrease Iacrease
4. Effect of a tax on buyers and sellers The following graph shows the weekly market for handbags in some hypothetical economy. Suppose the government levies a tax of $40.60 per bag. The tax places a wedge between the price buyers pay and the price sellers receive. PRICE (Dollars per bag) 200 180 160 140 120 100 80 60 40 20 0 Demand 0 50 Tax Wedge Supply ++ 100 150 200 250 300 350 QUANTITY (Baas of handbags) 400 450 500 ?
7. Effect of a tax on buyers and sellers The following graph shows the weekly market for craft beer in some hypothetical economy. Suppose the government levies a tax of $40.60 per case. The tax places a wedge between the price buyers pay and the price sellers receive. PRICE (Dollars per case) 200 100 140 140 120 400 40 411 20 11 Demand 40 20 Tax Wedge Supply 20 30 411 30 4 19 NO QUANTITY (Cases of craft beer) 100
6. The diagram below shows the market for chromebooks in the town of Smallville, U.S.A. Policy mak- ers want to collect money for more paper books in school and place a tax of 100 $ on chromebooks. Describe the impact of the tax on the market below. Price 500 450 400 350 300 250 200 150 100 50 100 200 300- Chromebooks 800 900 1,000 7. After the tax, 8. After the tax, consumers pay a price of . 9. After the tax, producers receive a price of 10. What amount of tax revenues are collected when the tax is instituted?. chromebooks are exchanged in the market.
1. Consider the market for candy bars given below. Suppose that the government imposes a tax of $2 per candy bar in this market. Show on the graph and calculate the following: Price 5 $4.50 $4 $3.50 Supply 53 $2.50 $2 $1.50 $1 Demand S0.50 400 800 1200 1600 2000 2400 2800 3200 3600 4000 Candy Bars A. The quantity the market will produce with the tax. B. The government revenue from the tax. C. The deadweight loss from the tax. D. The consumer surplus with the tax. E. The producer surplus with the tax.
The market supply and demand for a product are shown in the diagram below. Now supose the government imposes a per-unit tax of $1 on producers. (i) What happens to total revenue received by producers after they pay the tax to the government? Explain. (ii) Will producer surplus increase, decrease, or stay the same? (iii) Will total surplus increase, decrease, or stay the same? Explain.
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5. Calculating tax incidence Suppose that the local government of Raleigh decides to institute a tax on soda producers. Before the tax, 25 million liters of soda were sold every month at a price of $11 per liter. After the tax, 19 million liters of soda are sold every month; consumers pay $16 per liter, and producers receive $7 per liter (after paying the tax). The amount of the tax on a liter of soda is 3 that falls on producers is 5 per liter. O True per liter. Of this amount, the burden that falls on consumers is 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. False per liter, and the burden

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