Instead, suppose the government taxes bucket hats. The following graph shows the annual supply and demand for this good, as well as the supply curve shifted up by the amount of the proposed tax ($25 per hat). On the following graph, do for bucket hats the same thing you did previously on the graph for windbreakers. Use the green rectangle (triangle symbols) to shade the area that represents tax revenue for bucket hats. Then, use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. 60 PRICE (Dollars per hat) Supply S+Tax 45 40 35 X 30 25 20 15 10 55 50 5 Bucket Hats Market 0 D, B 0 50 100 150 200 250 300 350 400 450 500 550 600 QUANTITY (Hats) If the Government Taxes... Windbreakers at $25 per windbreaker Bucket hats at $25 per hat Tax Revenue Tax Revenue (Dollars) Deadweight Loss Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals. Deadweight Loss (Dollars) ?) Suppose the government wants to tax the good that will generate more tax revenue at a lower welfare cost. In this case, it should tax because, all else held constant, taxing a good with a relatively elastic demand generates larger tax revenue and smaller deadweight loss.
Instead, suppose the government taxes bucket hats. The following graph shows the annual supply and demand for this good, as well as the supply curve shifted up by the amount of the proposed tax ($25 per hat). On the following graph, do for bucket hats the same thing you did previously on the graph for windbreakers. Use the green rectangle (triangle symbols) to shade the area that represents tax revenue for bucket hats. Then, use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. 60 PRICE (Dollars per hat) Supply S+Tax 45 40 35 X 30 25 20 15 10 55 50 5 Bucket Hats Market 0 D, B 0 50 100 150 200 250 300 350 400 450 500 550 600 QUANTITY (Hats) If the Government Taxes... Windbreakers at $25 per windbreaker Bucket hats at $25 per hat Tax Revenue Tax Revenue (Dollars) Deadweight Loss Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals. Deadweight Loss (Dollars) ?) Suppose the government wants to tax the good that will generate more tax revenue at a lower welfare cost. In this case, it should tax because, all else held constant, taxing a good with a relatively elastic demand generates larger tax revenue and smaller deadweight loss.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Please solve the second image. *First image is for information only.
Transcribed Image Text:The government is considering levying a tax of $25 per unit on suppliers of either windbreakers or bucket hats. The supply curve for each of these two
goods is identical, as you can see on each of the following graphs. The demand for windbreakers is shown by Dw (on the first graph), and the demand
for bucket hats is shown by DB (on the second graph).
Suppose the government taxes windbreakers. The following graph shows the annual supply and demand for this good. It also shows the supply curve
(S + Tax) shifted up by the amount of the proposed tax ($25 per windbreaker).
On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for windbreakers. Then use the
black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax.
(?)
PRICE (Dollars per windbreaker)
60
55
50
45
40
35
30
25
20
15
10
5
0
Windbreakers Market
S+Tax
Supply
DW
0 50 100 150 200 250 300 350 400 450 500 550 600
QUANTITY (Windbreakers)
Tax Revenue
Deadweight Loss
Transcribed Image Text:Instead, suppose the government taxes bucket hats. The following graph shows the annual supply and demand for this good, as well as the supply
curve shifted up by the amount of the proposed tax ($25 per hat).
On the following graph, do for bucket hats the same thing you did previously on the graph for windbreakers. Use the green rectangle (triangle
symbols) to shade the area that represents tax revenue for bucket hats. Then, use the black triangle (plus symbols) to shade the area that represents
the deadweight loss associated with the tax.
PRICE (Dollars per hat)
60
55
50
S+Tax
45
40
35
A
30
25
20
15
10
5
Bucket Hats Market
0
Supply
D,
If the Government Taxes...
Windbreakers at $25 per windbreaker
Bucket hats at $25 per hat
B
0 50 100 150 200 250 300 350 400 450 500 550 600
QUANTITY (Hats)
Tax Revenue
Deadweight Loss
?
Complete the following table with the tax revenue collected and deadweight loss caused by each of the tax proposals.
Tax Revenue
(Dollars)
Deadweight Loss
(Dollars)
Suppose the government wants to tax the good that will generate more tax revenue at a lower welfare cost. In this case, it should tax
because, all else held constant, taxing a good with a relatively
elastic demand generates larger tax revenue and
smaller deadweight loss.
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