9. Relationship between tax revenues, deadweight loss, and demandelasticityThe government is considering levying a tax of $60 per unit on suppliers of either smart watches or yoga mats. The supply curve for each of these twogoods is identical, as you can see on each of the following graphs. The demand for smart watches is shown by Dw (on the first graph), and thedemand for yoga mats is shown by Dy (on the second graph).Suppose the government taxes smart watches. The following graph shows the annual supply and demand for this good. It also shows the supply curve(S + Tax) shifted up by the amount of the proposed tax ($60 per watch).On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for smart watches. Then use theblack triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax.PRICE (Dollars per watch)1201101009080706050403020100Smart Watches MarketS+TaxSupplyMO0 50 100 150 200 250 300 350 400 450 500 550 600QUANTITY (Watches)Tax RevenueDeadweight Loss(?)Instead, suppose the government taxes yoga mats. The following graph shows the annual supply and demand for this good, as well as the supplycurve shifted up by the amount of the proposed tax ($60 per mat).On the following graph, do for yoga mats the same thing you did previously on the graph for smart watches. Use the green rectangle (trianglesymbols) to shade the area that represents tax revenue for yoga mats. Then, use the black triangle (plus symbols) to shade the area that representsthe deadweight loss associated with the tax. Instead, suppose the government taxes yoga mats. The following graph shows the annual supply and demand for this good, as well as the supplycurve shifted up by the amount of the proposed tax ($60 per mat).On the following graph, do for yoga mats the same thing you did previously on the graph for smart watches. Use the green rectangle (trianglesymbols) to shade the area that represents tax revenue for yoga mats. Then, use the black triangle (plus symbols) to shade the area that representsthe deadweight loss associated with the tax.PRICE (Dollars per mat)1201101009080706050403020100Yoga Mats MarketS+TaxIf the Government Taxes...Smart watches at $60 per watchYoga mats at $60 per matSupply0 50 100 150 200 250 300 350 400 450 500 550 600QUANTITY (Mats)smaller deadweight loss.DyYTax RevenueDeadweight LossComplete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals.Tax Revenue Deadweight Loss(Dollars)(Dollars)(?)Suppose the government wants to tax the good that will generate more tax revenue at a lower welfare cost. In this case, it should taxbecause, all else held constant, taxing a good with a relativelyelastic demand generates larger tax revenue and

Tax incidence refers to the burden of tax that is imposed on buyers and sellers.The burden of tax…

Answered: Complete the following table with the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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According to the Ramsey taxation result, which of the following markets would be the most efficient to tax? Pizza Caviar Ice cream Rice
You are Brandon Johnson. The city needs money. You are contemplating 2 sources of revenue: levying a tax on gas in Chicago at $.50/ gal, and/or increasing the CTA fare $.25. The 2 demand schedules are as follows. Gas price Gallons demanded (in millions) CTA fare Number of riders (one way) (in millions) $4.50 1 $2.00 6 4.00 1.1 1.75 8 3.50 1.2 1.50 10 3.00 1.3…
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 many rides will be demanded after the introduction of the excise tax? 7 million 10 million 8 million 9 million
Doyle and Samphantharak (2008) find that when a 5% gas tax is implemented, prices consumers pay for gas increase by about 4%. What role does demand elasticity play in determining the size of this price change? That is, under what demand elasticity cases would the price change be closer to 5%, or closer to 0%? Illustrate and explain using supply-and-demand graph(s)..
Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals. If the Government Taxes... Leather jackets at $100 per jacket Smartphones at $100 per phone Tax Revenue (Dollars) smaller deadweight loss. Deadweight Loss (Dollars) Suppose the government wants to tax the good that will generate more tax revenue at a lower welfare cost. In this case, it should tax because, all else held constant, taxing a good with a relatively elastic demand generates larger tax revenue and
Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss? The greater are the price elasticities of supply and demand, the greater is the deadweight loss. The greater is the price elasticity of supply and the smaller is the price elasticity of demand, the greater is the deadweight loss. The smaller are the decreases in quantity demanded and quantity supplied, the greater the deadweight loss. The smaller is the wedge between the effective price to sellers and the effective price to buyers, the greater is the deadweight loss.
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) 50 45 40 35 30 25 20 15 10 5 0 0 Supply Demand 8 16 24 32 40 48 56 64 72 80 QUANTITY (Cases) Graph Input Tool Suppose the government imposes a $10-per-case tax on suppliers. At this tax amount, the equilibrium quantity of champagne is Market for Champagne Quantity (Cases) Demand Price (Dollars per case) Tax (Dollars per case) 32 30.00 10.00 Supply Price (Dollars per case) cases, and the government collects $ 20.00 in tax revenue.
You are Brandon Johnson. The city needs money. You are contemplating 2 sources of revenue: levying a tax on gas in Chicago at $.50/ gal, and/or increasing the CTA fare $.25. The 2 demand schedules are as follows. Gas price Gallons demanded (in millions) CTA fare Number of riders (one way) (in millions) $4.50 1 $2.00 6 4.00 1.1 1.75 8 3.50 1.2 1.50 10 3.00 1.3…
(a) Show the market for housing in equilibrium on a diagram, where demand is less elastic than supply, andlabel the respective consumer and producer surpluses. Discuss whether this market is Pareto efficient. (b) Assume that the State Government imposes a per-unit tax on the sellers of houses. A new diagram,shows the imposition of this tax on the market for housing. Does the imposition of this tax cause a Paretoimprovement to the market, explain? (c) Is the tax imposed in part (b) effective for the collection of Government revenue? Justify your answer withreference to your diagram in part (b).
Refer to Figure 2. Suppose the government imposes a tax of $0.60 per soft drink purchased. When it comes to the economic incidence, who is bearing the tax burden, buyers, or sellers? Explain using actual numbers .......... 1) Suppose the government introduces a ceiling on the fees that lawyers are permitted to charge. This fee ceiling A) is always inefficient. B) results in an inefficient use of resources when the ceiling is above the equilibrium fee. C) results in an efficient use of resources when the ceiling is above the equilibrium fee. D) results in an efficient use of resources when the ceiling is below the equilibrium fee. E) is always efficient. 2) An effective rent ceiling A) increases producer surplus. B) results in a producer surplus of zero. C) sometimes increases producer surplus and sometimes decreases producer surplus. D) decreases producer surplus. E) decreases the supply of housing.
Suppose before a tax is created, the market price is $10.66 and the quantity is 120. Now suppose a government creates a $4.3 excise tax paid by sellers. After the tax, the quantity falls to 100 and the market price is $13.76. Based on this information, the tax incidence on buyers is what?

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