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 wine, 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 I Supply Demand 09 18 27 36 45 54 63 72 81 90 QUANTITY (Cases) Graph Input Tool Suppose the government imposes a $10-per-case tax on suppliers. At this tax amount, the equilibrium quantity of wine is Market for Wine Quantity (Cases) Demand Price (Dollars per case) Tax (Dollars per case) 36 30.00 10.00 Supply Price (Dollars per case) cases, and the government collects $ ? 20.00 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 wine, 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 I Supply Demand 09 18 27 36 45 54 63 72 81 90 QUANTITY (Cases) Graph Input Tool Suppose the government imposes a $10-per-case tax on suppliers. At this tax amount, the equilibrium quantity of wine is Market for Wine Quantity (Cases) Demand Price (Dollars per case) Tax (Dollars per case) 36 30.00 10.00 Supply Price (Dollars per case) cases, and the government collects $ ? 20.00 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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Question

Consider the deadweight loss generated in each of the following cases: no tax, a tax of $20 per case, and a tax of $40 per case.
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 1× Base × 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.)
DEADWEIGHT LOSS (Dollars)
900
810
720
630
540
450
360
270
180
90
0
0 5
10
15 20 25 30
TAX (Dollars per case)
35
As the tax per case increases, deadweight loss
40
45 50
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 wine, 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
1
Supply
Demand
09 18 27 36 45 54 63 72 81 90
QUANTITY (Cases)
Graph Input Tool
Suppose the government imposes a $10-per-case tax on suppliers.
At this tax amount, the equilibrium quantity of wine is
Market for Wine
Quantity
(Cases)
Demand Price
(Dollars per case)
Tax
(Dollars per case)
36
30.00
10.00
Supply Price
(Dollars per case)
cases, and the government collects $
?
20.00
in tax revenue.

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