DEADWEIGHT LOSS (Dollars) TAX REVENUE (Dollars) Now calculate the government's tax revenue if it sets a tax of $0, $20, $40, $50, $60, $80, or $100 per bottle. (Hint: To find the equilibrium quantity after the tax, adjust the "Quantity" field until the Tax Wedge equals the value of the per-unit tax.) Using the data you generate, plot a Laffer curve by using the green points (triangle symbol) to plot total tax revenue at each of those tax levels. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. 1250 1120 1000 875 750 625 500 375 125 D 0 10 30 40 GO 60 80 TAX (Dollars per bottle) Laffer Curve Suppose the government is currently imposing an $80-per-bottle tax on vodka. True or False: The government can raise its tax revenue by decreasing the per-unit tax on vodka. True False Consider the deadweight loss generated in each of the following cases: no tax, a tax of $40 per bottle, and a tax of $80 per battle. On the following graph, use the black curve (plus symbols) to illustrate the deadweight loss in these cases. (Hint: Remember that the area of a triangle is equal to x Base x Height. In the case of a deadweight loss triangle found on the graph input tool, the base is the amount of the tax and the height is the reduction in quantity caused by the tax.) 2000 1500 1500 1400 1000 800 800 400 200 0 0 10 20 30 40 50 60 70 80 TAX (Dollars per bottle) As the tax per bottle increases, deadweight loss k Deadweight Loss
DEADWEIGHT LOSS (Dollars) TAX REVENUE (Dollars) Now calculate the government's tax revenue if it sets a tax of $0, $20, $40, $50, $60, $80, or $100 per bottle. (Hint: To find the equilibrium quantity after the tax, adjust the "Quantity" field until the Tax Wedge equals the value of the per-unit tax.) Using the data you generate, plot a Laffer curve by using the green points (triangle symbol) to plot total tax revenue at each of those tax levels. Note: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically. 1250 1120 1000 875 750 625 500 375 125 D 0 10 30 40 GO 60 80 TAX (Dollars per bottle) Laffer Curve Suppose the government is currently imposing an $80-per-bottle tax on vodka. True or False: The government can raise its tax revenue by decreasing the per-unit tax on vodka. True False Consider the deadweight loss generated in each of the following cases: no tax, a tax of $40 per bottle, and a tax of $80 per battle. On the following graph, use the black curve (plus symbols) to illustrate the deadweight loss in these cases. (Hint: Remember that the area of a triangle is equal to x Base x Height. In the case of a deadweight loss triangle found on the graph input tool, the base is the amount of the tax and the height is the reduction in quantity caused by the tax.) 2000 1500 1500 1400 1000 800 800 400 200 0 0 10 20 30 40 50 60 70 80 TAX (Dollars per bottle) As the tax per bottle increases, deadweight loss k Deadweight Loss
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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