Now calculate the government's tax revenue if it sets a tax of $0, $20, $40, $50, $60, $80, or $100 per bottle. (Hint: To find the equilibrium quantity after the tax, adjust the "Quantity" field until the Tax Wedge equals the value of the per-unit tax.) Using the data you generate, plot a Laffer curve by using the green points (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. TAX REVENUE (Dollars) 1250 1125 1000 875 750 625 500 375 250 125 0 0 10 20 30 40 50 60 70 80 90 100 TAX (Dollars per bottle) Laffer Curve Suppose the government is currently imposing an $80-per-bottle tax on vodka. True or False: The government can raise its tax revenue by decreasing the per-unit tax on vodka. ○ True ○ False Consider the deadweight loss generated in each of the following cases: no tax, a tax of $40 per bottle, and a tax of $80 per bottle. 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 × 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) 2000 1800 1600 1400 1200 1000 800 600 400 200 0 0 10 20 30 40 50 60 70 80 90 100 TAX (Dollars per bottle) As the tax per bottle increases, deadweight loss Deadweight Loss ?
Now calculate the government's tax revenue if it sets a tax of $0, $20, $40, $50, $60, $80, or $100 per bottle. (Hint: To find the equilibrium quantity after the tax, adjust the "Quantity" field until the Tax Wedge equals the value of the per-unit tax.) Using the data you generate, plot a Laffer curve by using the green points (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. TAX REVENUE (Dollars) 1250 1125 1000 875 750 625 500 375 250 125 0 0 10 20 30 40 50 60 70 80 90 100 TAX (Dollars per bottle) Laffer Curve Suppose the government is currently imposing an $80-per-bottle tax on vodka. True or False: The government can raise its tax revenue by decreasing the per-unit tax on vodka. ○ True ○ False Consider the deadweight loss generated in each of the following cases: no tax, a tax of $40 per bottle, and a tax of $80 per bottle. 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 × 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) 2000 1800 1600 1400 1200 1000 800 600 400 200 0 0 10 20 30 40 50 60 70 80 90 100 TAX (Dollars per bottle) As the tax per bottle increases, deadweight loss Deadweight Loss ?
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter8: Application: The Cost Of Taxation
Section: Chapter Questions
Problem 10PA
Related questions
Question
Transcribed Image Text:Now calculate the government's tax revenue if it sets a tax of $0, $20, $40, $50, $60, $80, or $100 per bottle. (Hint: To find the equilibrium quantity
after the tax, adjust the "Quantity" field until the Tax Wedge equals the value of the per-unit tax.) Using the data you generate, plot a Laffer curve by
using the green points (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.
TAX REVENUE (Dollars)
1250
1125
1000
875
750
625
500
375
250
125
0
0
10
20
30
40
50 60
70
80
90
100
TAX (Dollars per bottle)
Laffer Curve
Suppose the government is currently imposing an $80-per-bottle tax on vodka.
True or False: The government can raise its tax revenue by decreasing the per-unit tax on vodka.
○ True
○ False
Consider the deadweight loss generated in each of the following cases: no tax, a tax of $40 per bottle, and a tax of $80 per bottle.
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 × 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)
2000
1800
1600
1400
1200
1000
800
600
400
200
0
0
10
20
30 40
50
60
70
80
90
100
TAX (Dollars per bottle)
As the tax per bottle increases, deadweight loss
Deadweight Loss
?
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