At current income tax rates, marginal revenue of taxation is the same for Suzi and Billy. Marginal utility of consumption is equal to 2 for Suzi and equal to 10 for Billy. Which of the following would reduce total deadweight loss without reducing revenue? O Increase tax on Billy and reduce tax on Suzi. Increase tax on Suzi and reduce tax on Billy. O Reduce taxes on both Billy and Suzi. O Increase taxes on both Billy and Suzi. 22

At current income tax rates, marginal revenue of taxation is the same for Suzi and Billy. Marginal utility of consumption is equal to 2 for Suzi and equal to 10 for Billy. Which of the following would reduce total deadweight loss without reducing revenue? O Increase tax on Billy and reduce tax on Suzi. Increase tax on Suzi and reduce tax on Billy. O Reduce taxes on both Billy and Suzi. O Increase taxes on both Billy and Suzi. 22

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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5. A consumer has preferences over vegetables and meat given by the utility function U(V, M) of vegetables is $2 and the price of each serving of meat is $1. The government wants to encourage vegetable consumption so it puts a tax of $1 on each unit of meat purchased. If the consumer maximizes their utility, how much will the tax reduce their meat consumption? VAM2/3. They currently have $30 to spend, the price of each serving %3D
4 Proportional Tax Suppose the market for a good is described by the following equations: Qa=60-3P and Qs = -20+5P 1. If the government asks the supplier to pay a 20% GST for every transaction: • What is the new supply and demand curve? • What is the new equilibrium of price paid by the consumers to producers? . What is the new equilibrium quantity? • How much is the total tax collected? 2. If the government asks the consumers to pay a 20% GST for every transaction: redo sub-questions above 3. For proportional tax, do taxing suppliers and taxing consumers make a difference?
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.
Explain whether the state of Tennessee had a surplus in fiscal year 2019. A The state did not have a surplus in fiscal year 2019 because the total revenues were equal to the total expenditures. B The state had a surplus in fiscal year 2019 because total revenues were about $7.676 billion more than total expenditures. C The state did not have a surplus in fiscal year 2019 because total expenditures were about $7.676 billion more than total revenues. D The state had a surplus in fiscal year 2019 because total revenues were about $53.441 billion
QUESTION 10 Using the attached table, once the tax is implemented, the tax revenue will be be Quantity MB 520 525 530 535 540 545 550 164 160 156 152 148 144 140 136 MC 80 90 100 110 120 130 140 555 150 Note: MB designates the marginal benefit and reflects the values on the demand curve. MC is the marginal cost and designates the values on the supply curve. O $18,375, $1,750 $70, $35 O $36,750, $875 O $525, $1,750 MB-Tax (Amount producer receives) 94 90 86 and the deadweight loss will 82 78 74 70 66
If the government wants to increase the tax revenue they collect from sellers, then it should O Tax goods that have low elasticity of demand and high elasticity of supply. O Tax goods that have high elasticity of demand and supply. Tax goods that have high elasticity of demand and low elasticity of supply. O Tax goods that have low elasticity of demand and supply.
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9. When a sales tax is imposed on sellers, we can imagine a hypothetical supply curve shifted to the left such that the vertical distance between the original supply curve and the new (supply + tax) curve equals the sales tax divided by the price elasticity of demand. sales tax multiplied by the price elasticity of demand. sales tax multiplied by the price elasticity of supply. amount of the sales tax.