that mean it would raise a small amount of tax revenue? Or would that mean that tax revenue would be larger-because deadweight loss is smaller?
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- The following graph shows the daily market for jeans when the tax on sellers is set at $0 per pair. Suppose the government institutes a tax of $40.60 per pair, to be paid by the seller. (Hint: To see the impact of the tax, enter the value of the tax in the Tax on Sellers field and move the green line to the after-tax equilibrium by adjusting the value in the Quantity field. Then, enter zero in the Tax on Sellers field. You should see a tax wedge between the price buyers pay and the price sellers receive.) 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. Graph Input Tool Market for Jeans 200 I Quantity (Pairs of jeans) 180 100 Supply 160 Demand Price (Dollars per pair) Supply Price (Dollars per pair) 132.00 0.00 140 120 Supply Shifter 100 Demand Tax on Sellers (Dollars per…Complete the following table by using the previous graphs to determine the values of consumer and producer surplus before the tax, and consumer surplus, producer surplus, tax revenue, and deadweight loss after the tax. Note: You can determine the areas of different portions of the graph by selecting the relevant area. Before Tax After Tax (Dollars) (Dollars) Consumer Surplus Producer Surplus Tax Revenue 0 Deadweight Loss 0Notice that the before-tax equilibrium price was 25. Compared to the price, in the after-tax equilibrium, how much more would consumers need to pay to buy one X? This is the consumers’ tax incidence. Also, in the after-tax equilibrium, how much less would sellers receive from each X they sell? This is the sellers’ tax incidence. (note: this question asks changes in the prices from before-tax equilibrium price 25) Consumers’ tax incidence: Sellers’ tax incidence:
- Does a tax on buyers affect the demand curve?Suppose that the demand curve for wheat is: Q=140-20p and the supply curve is Q³=20p. The government imposes a price support at p-$4.00. What is the deadweight loss if the government supports the price by purchasing excess supply? (Assume the wheat will be destroyed.) The deadweight loss is $(Round your answer to the nearest penny and enter the deadweight loss as a positive number.) Suppose the government is considering supporting the price using a deficiency payment program. What would be the amount of the deficiency payment? The deficiency payment would be $ and there would be a deadweight loss of $. (Round your answer to the nearest penny and enter the deadweight loss as a positive number)The following graph depicts a market where a tax has been imposed. Pe was the equilibrium price before the tax was imposed, and Qe was the equilibrium quantity. After the tax, PC is the price that consumers pay, and PS is the price that producers receive. QT units are sold after the tax is imposed. NOTE: The areas B and C are rectangles that are divided by the supply curve ST. Include both sections of those rectangles when choosing your answers. What is the amount of the tax, as measured along the y axis? PC + PS Pe – PS PC – PS PC – P* Pe + PS
- Doyle and Samphantharak (2008) find that when a 5% gas tax is implemented, prices consumers pay for gas increase by about 4%. What role does demand elasticity play in determining the size of this price change? That is, under what demand elasticity cases would the price change be closer to 5%, or closer to 0%? Illustrate and explain using supply-and-demand graph(s)..Which of the following statements is correct regarding a tax on a good and the resulting deadweight loss? The greater are the price elasticities of supply and demand, the greater is the deadweight loss. The greater is the price elasticity of supply and the smaller is the price elasticity of demand, the greater is the deadweight loss. The smaller are the decreases in quantity demanded and quantity supplied, the greater the deadweight loss. The smaller is the wedge between the effective price to sellers and the effective price to buyers, the greater is the 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 champagne, 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 0 Supply Demand 8 16 24 32 40 48 56 64 72 80 QUANTITY (Cases) Graph Input Tool Suppose the government imposes a $10-per-case tax on suppliers. At this tax amount, the equilibrium quantity of champagne is Market for Champagne Quantity (Cases) Demand Price (Dollars per case) Tax (Dollars per case) 32 30.00 10.00 Supply Price (Dollars per case) cases, and the government collects $ 20.00 in tax revenue.
- If tax incidence is not affected by whether the government makes buyers or sellers pay the tax then which factors determine the tax incidence?Subsidies, unlike taxes, tend to increase the quantities of goods and/or services traded and consumers tend to pay a lower price for the good. From this perspective, the benefits for consumers are evident, while the effects for producers are not so conclusive. In this context, what would be the effect(s) that subsidies have on producers?I. Subsidies positively affect the quantity supplied, but the producer must pay the subsidy.II. Market prices increase.III. Producers increase the quantity offered, but the price they charge is the one that corresponds according to their supply function.Select one:a. II and IIIb. III onlyc. I, II and IIId. I and IIIe. I onlyAnswer the given question with a proper explanation and step-by-step solution.