4. The Laffer curveGovernment-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 cigarettes, 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 pack)20181614SupplyDemand0 20 40 60 80 100 120 140 160 180 200QUANTITY (Packs)Suppose the government imposes a $4-per-pack tax on suppliers.At this tax amount, the equilibrium quantity of cigarettes isGraph Input ToolMarket for CigarettesQuantity(Packs)Demand Price(Dollars per pack)Tax(Dollars per pack)8012.004.00Supply Price(Dollars per pack)packs, and the government collects $(?)8.00in tax revenue. Consider the deadweight loss generated in each of the following cases: no tax, a tax of $8 per pack, and a tax of $16 per pack.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 × Base × Height. In the case of a deadweight loss triangle found on the graph input tool, the base is the amount of the taxand the height is the reduction in quantity caused by the tax.)DEADWEIGHT LOSS (Dollars)800720640580480400160800024681012TAX (Dollars per pack)14As the tax per pack increases, deadweight loss1618 20Deadweight Loss(?)

Equilibrium in the market occurs at the intersection of the demand and supply curves. The…

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 cigarettes, 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.

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 cigarettes, 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.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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