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)504540353025201510500SupplyDemand8 16 24 32 40 48 56 64 72 80QUANTITY (Cases)Graph Input ToolSuppose the government imposes a $10-per-case tax on suppliers.At this tax amount, the equilibrium quantity of champagne isMarket for ChampagneQuantity(Cases)Demand Price(Dollars per case)Tax(Dollars per case)3230.0010.00Supply Price(Dollars per case)cases, and the government collects $20.00in tax revenue. Consider the deadweight loss generated in each of the following cases: no tax, a tax of $20 per case, and a tax of $40 per case.On the following graph, use the black curve (plus symbols) to illustrate the deadweight loss in these cases. (Hint: Remember that the area of atriangle is equal to X Base × Height. In the case of a deadweight loss triangle found on the graph input tool, the base is the amount of the tax andthe height is the reduction in quantity caused by the tax.)DEADWEIGHT LOSS (Dollars)800720640560480400320240160800051015 20 25 30TAX (Dollars per case)35As the tax per case increases, deadweight loss404550Deadweight Loss

Tax is collected by the government from every individual in an economy to generate revenue for…

Answered: As the tax per case increases,…

Business

Economics

As the tax per case increases, deadweight loss

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

The division of a tax burden between Consumers and Producers is known as Tax IncidenceProducers bear the majority of a tax burden in which of the following circumstances?
Find the consumer surplus and producer surplus. Demand p= 100-0.00006x Supply p= 90+0.00004x
The following graph shows the market for the long-distance bus rides. In the absence of taxes, the equilibrium price of a ride is $5 and the equilibrium quantity is 10 million rides. Suppose that regulator levies an excise tax on bus service providers. The amount of excise tax equals $2 per ride. How much will bus service providers get per ticket after the tax is imposed? $5.50 $4 $4.50 $5
A price ceiling is only effective if it is above the market equilibrium. True False
The price elasticity of demand for beer among young adults (age 18 to 24) is about 1.30, and the number of highway deaths is roughly proportional to the group’s beer consumption. If a state imposes a beer tax that increases the price of beer by 20%, by how much will the number of highway deaths among young adults decrease?
None
iven the following information QD = 240-5P QS= P Where QD is the quantity demanded, Qs is the quantity supplied and P is the price. Suppose the government decides to impose a tax of $12 per unit on sellers in this market. Determine the deadweight loss of the tax
In which of these scenarios is the deadweight loss of the tax largest? AA BB с с DD B D
2. The elasticity of demand for guitars is -2.0, and the elasticity of supply is 3.0. How much will the price of guitars change with a per-unit tax of $2?
Please answer the following, a diagram and one paragraph should help support your answer. With consideration for elasticity (especially PED), what would be one industry in which the government instituting a subsidy would make sense and why? EXAMPLE: It would make sense for the government to subsidize the fashion industry because it is generally elastic in terms of PED, and it would benefit both producers and consumers due to etc.
What is the price elasticity of demand(Using the Midpoint method) when the price changes from $10 to $13? If the Government imposes a tax of $6 per burrito, how many burritos will be sold in the market?