Consider the deadweight loss generated in each of the following cases: no tax, a tax of $4 per pack, and a tax of $8 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 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 andthe height is the reduction in quantity caused by the tax.)DEADWEIGHT LOSS (Dollars)200180160140120100806040200012364 5TAX (Dollars per pack)7As the tax per pack increases, deadweight loss8910Deadweight 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 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)109TAX REVENUE (Dollars)Suppose the government imposes a $2-per-pack tax on suppliers.At this tax amount, the equilibrium quantity of cigarettes is200180160140120100806040200 10 20 30 40 50 60 70 80 90 100QUANTITY (Packs)0Now calculate the government's tax revenue if it sets a tax of $0, $2, $4, $5, $6, $8, or $10 per pack. (Hint: To find the equilibrium quantity after thetax, adjust the "Quantity" field until the Tax equals the value of the per-unit tax.) Using the data you generate, plot a Laffer curve by using the greenpoints (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.0Supply1Demand2O TrueFalse35 6 7TAX (Dollars per pack)Graph Input ToolMarket for CigarettesQuantity(Packs)89 10Demand Price(Dollars per pack)Tax(Dollars per pack)Suppose the government is currently imposing a $3-per-pack tax on cigarettes.Laffer Curve505.0050 packs, and the government collects(?)0.00True or False: The government can raise its tax revenue by increasing the per-unit tax on cigarettes.Supply Price(Dollars per pack)(?)5.00$100 in tax revenue.

Government imposes taxes on various harmful materials with a view that higher prices could…

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. PRICE (Dollars per pack) 10 9 8 CO 10 2 1 0 Supply Demand 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Packs) Graph Input Tool Market for Cigarettes Quantity (Packs) Suppose the government imposes a $2-per-pack tax on suppliers. At this tax amount, the equilibrium quantity of cigarettes is Demand Price (Dollars per pack) Tax (Dollars per pack) 50 5.00 0.00 Supply Price (Dollars per pack) 50 packs, and the government collects ? 5.00 $100 in tax revenue.

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. PRICE (Dollars per pack) 10 9 8 CO 10 2 1 0 Supply Demand 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Packs) Graph Input Tool Market for Cigarettes Quantity (Packs) Suppose the government imposes a $2-per-pack tax on suppliers. At this tax amount, the equilibrium quantity of cigarettes is Demand Price (Dollars per pack) Tax (Dollars per pack) 50 5.00 0.00 Supply Price (Dollars per pack) 50 packs, and the government collects ? 5.00 $100 in tax revenue.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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