Having rejected a tariff on textiles (a tax on imports), the president of Isoland is now considering the same-sized tax on textile consumption (including both imported and domestically produced textiles). Under a textile consumption tax, the quantity of textiles consumed in Isoland will be (SAME AS, HIGHER , LOWER)   the quantity consumed under a tariff, and the quantity produced in Isoland will be (SAME AS, HIGHER , LOWER)      the quantity produced under a tariff.   The following table shows the effect of an import tariff on the nation of Isoland.   Compared to the consumption tax, the tariff raises (LESS, MORE , SAME AMOUNT)   revenue for the government and has  (SMALLER, LARGER, EQUAL SIZE)  deadweight loss associated with it.

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Chapter1: Making Economics Decisions
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Having rejected a tariff on textiles (a tax on imports), the president of Isoland is now considering the same-sized tax on textile consumption (including both imported and domestically produced textiles).
Under a textile consumption tax, the quantity of textiles consumed in Isoland will be (SAME AS, HIGHER , LOWER)   the quantity consumed under a tariff, and the quantity produced in Isoland will be (SAME AS, HIGHER , LOWER)      the quantity produced under a tariff.
 
The following table shows the effect of an import tariff on the nation of Isoland.
 
Compared to the consumption tax, the tariff raises (LESS, MORE , SAME AMOUNT)   revenue for the government and has  (SMALLER, LARGER, EQUAL SIZE)  deadweight loss associated with it.
The image contains a Word document with a table designed to analyze the changes in various economic components before and after a unit tax and a consumption tax. Here's the transcription and description:

---

**Instructions:**
Complete the remaining columns of the following table by indicating the effect of the per-unit tax or sales/consumption tax.

**Table:**

| Component        | Before Tax | After Unit Tax      | Change          | After Consumption Tax | Change          |
|------------------|------------|---------------------|-----------------|-----------------------|-----------------|
| Producer Surplus |            | A - B = (C - D - E) | ↓               |                       | ↓               |
| Consumer Surplus |            | C - D               | ↓               |                       | ↓               |
| Government       |            | E                   | ↑               |                       | ↑               |
| Total Surplus    |            | A - B = (C - D - E) | - (D + E)      |                       | - (D + E)      |

**Explanation of Columns:**

- **Before Tax:** Indicates the economic status before any tax is applied.
- **After Unit Tax:** Shows changes resulting from a per-unit tax:
  - **Producer Surplus** decreases by the formula A - B = (C - D - E).
  - **Consumer Surplus** decreases by C - D.
  - **Government** gains E in revenue.
  - **Total Surplus** shows a net decrease by - (D + E).

- **After Consumption Tax:** Depicts the impact after sales tax:
  - **Producer Surplus** still shows a decrease.
  - **Consumer Surplus** continues to show a decline.
  - **Government** gains more revenue.
  - **Total Surplus** indicates a similar decrease as after the unit tax.

---

No graphs or diagrams are included in this section.
Transcribed Image Text:The image contains a Word document with a table designed to analyze the changes in various economic components before and after a unit tax and a consumption tax. Here's the transcription and description: --- **Instructions:** Complete the remaining columns of the following table by indicating the effect of the per-unit tax or sales/consumption tax. **Table:** | Component | Before Tax | After Unit Tax | Change | After Consumption Tax | Change | |------------------|------------|---------------------|-----------------|-----------------------|-----------------| | Producer Surplus | | A - B = (C - D - E) | ↓ | | ↓ | | Consumer Surplus | | C - D | ↓ | | ↓ | | Government | | E | ↑ | | ↑ | | Total Surplus | | A - B = (C - D - E) | - (D + E) | | - (D + E) | **Explanation of Columns:** - **Before Tax:** Indicates the economic status before any tax is applied. - **After Unit Tax:** Shows changes resulting from a per-unit tax: - **Producer Surplus** decreases by the formula A - B = (C - D - E). - **Consumer Surplus** decreases by C - D. - **Government** gains E in revenue. - **Total Surplus** shows a net decrease by - (D + E). - **After Consumption Tax:** Depicts the impact after sales tax: - **Producer Surplus** still shows a decrease. - **Consumer Surplus** continues to show a decline. - **Government** gains more revenue. - **Total Surplus** indicates a similar decrease as after the unit tax. --- No graphs or diagrams are included in this section.
The image shows a Word document with a graph embedded on the page. The document interface includes various options like font type, size, and style, as well as a toolbar with options such as "File," "Home," "Insert," etc.

**Graph Description:**

The graph is a supply and demand diagram. Here’s a detailed explanation:

1. **Axes:**
   - The vertical axis represents the "Price of Tickets."
   - The horizontal axis represents the "Quantity of Tickets."

2. **Lines:**
   - **Demand Curve (D):** A downward-sloping line labeled as "Demand" indicating that as the price decreases, the quantity demanded increases.
   - **Supply Curve (S):** An upward-sloping line labeled as "Supply" showing that as the price increases, the supply increases.

3. **Equilibrium:**
   - The point where the demand and supply curves intersect is marked as the equilibrium point (P\*_e, Q\*_e). This is where the quantity of tickets demanded equals the quantity supplied, resulting in an equilibrium price (P\*) and quantity (Q\*).

4. **Areas:**
   - **Consumer Surplus (A):** The triangular area above the price level and below the demand curve.
   - **Producer Surplus (B):** The triangular area below the price level and above the supply curve.
   - **Deadweight Loss (C):** A shaded area on the graph representing inefficiency usually caused by a market disturbance such as a tax.

5. **Horizontal Sections:**
   - Marked by numbers 0, 1, 2, 3, 4, 5, referencing specific quantities on the horizontal axis.

This graph illustrates basic economic concepts of supply and demand, equilibrium, and the impact of changes such as price controls or taxes on market efficiency.
Transcribed Image Text:The image shows a Word document with a graph embedded on the page. The document interface includes various options like font type, size, and style, as well as a toolbar with options such as "File," "Home," "Insert," etc. **Graph Description:** The graph is a supply and demand diagram. Here’s a detailed explanation: 1. **Axes:** - The vertical axis represents the "Price of Tickets." - The horizontal axis represents the "Quantity of Tickets." 2. **Lines:** - **Demand Curve (D):** A downward-sloping line labeled as "Demand" indicating that as the price decreases, the quantity demanded increases. - **Supply Curve (S):** An upward-sloping line labeled as "Supply" showing that as the price increases, the supply increases. 3. **Equilibrium:** - The point where the demand and supply curves intersect is marked as the equilibrium point (P\*_e, Q\*_e). This is where the quantity of tickets demanded equals the quantity supplied, resulting in an equilibrium price (P\*) and quantity (Q\*). 4. **Areas:** - **Consumer Surplus (A):** The triangular area above the price level and below the demand curve. - **Producer Surplus (B):** The triangular area below the price level and above the supply curve. - **Deadweight Loss (C):** A shaded area on the graph representing inefficiency usually caused by a market disturbance such as a tax. 5. **Horizontal Sections:** - Marked by numbers 0, 1, 2, 3, 4, 5, referencing specific quantities on the horizontal axis. This graph illustrates basic economic concepts of supply and demand, equilibrium, and the impact of changes such as price controls or taxes on market efficiency.
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