Confused and not sure how to answer The following graph shows the Laffer curve for several tax rates (20, 40, 50, 60, 80).Tax Revenue (Thousands of dollars)5604804003202401608000 10 2030 40 50 60Tax Rate (Percent)7080 90 100Based on the graph, after the maximum revenue point, higher taxes lead torevenues, because the increase in tax revenue from the higher per-bottle tax is outweighed by thedecrease in tax revenue due to the declining number of bottles sold.tax The following graph input tool shows the market for gin. The orange curve represents supply, andthe blue curve represents demand.Note: You will not be graded on any changes you make to this graph. Once you enter a value in awhite field, the graph and any corresponding amounts in each grey field will change accordingly.PRICE (Dollars per bottle)40320716000TIIRT055114060QUANTITY (Thousands of bottles)120BO100Graph Input ToolMarket for ginQuantity(Thousandsof bottles)DemandPrice(Dollars perbottle)2530SupplyPrice(Dollars perbottle)Tax(Dollars perbottle)100To see the impact of the tax, enter the value of the tax in the Tax field. By entering the after-taxequilibrium quantity in the corresponding box, you will move the green line to the after-taxequilibrium. By entering 0 in the Tax field, you will see a tax wedge between the price buyers payand the price sellers receive.When the government imposes a $8-per-bottle tax on suppliers, the equilibrium quantity of gin isand the government collectsin tax revenue.

The demand curve shows consumer willingness and capacity to purchase a good at a particular price…

The following graph shows the Laffer curve for several tax rates (20, 40, 50, 60, 80). Tax Revenue (Thousands of dollars) 560 480 400 320 240 160 80 0 10 10 20 30 40 50 Tax Rate (Percent) 60 70 80 90 100 Based on the graph, after the maximum revenue point, higher taxes lead to tax revenues, because the increase in tax revenue from the higher per-bottle tax is outweighed by the decrease in tax revenue due to the declining number of bottles sold.

The following graph shows the Laffer curve for several tax rates (20, 40, 50, 60, 80). Tax Revenue (Thousands of dollars) 560 480 400 320 240 160 80 0 10 10 20 30 40 50 Tax Rate (Percent) 60 70 80 90 100 Based on the graph, after the maximum revenue point, higher taxes lead to tax revenues, because the increase in tax revenue from the higher per-bottle tax is outweighed by the decrease in tax revenue due to the declining number of bottles sold.

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

Confused and not sure how to answer

The following graph shows the Laffer curve for several tax rates (20, 40, 50, 60, 80).
Tax Revenue (Thousands of dollars)
560
480
400
320
240
160
80
0
0 10 20
30 40 50 60
Tax Rate (Percent)
70
80 90 100
Based on the graph, after the maximum revenue point, higher taxes lead to
revenues, because the increase in tax revenue from the higher per-bottle tax is outweighed by the
decrease in tax revenue due to the declining number of bottles sold.
tax

The following graph input tool shows the market for gin. The orange curve represents supply, and
the blue curve represents demand.
Note: You will not be graded on any changes you make to this graph. 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 bottle)
40
32
07
16
00
0
TIIRT
0
55
11
40
60
QUANTITY (Thousands of bottles)
1
20
BO
100
Graph Input Tool
Market for gin
Quantity
(Thousands
of bottles)
Demand
Price
(Dollars per
bottle)
25
30
Supply
Price
(Dollars per
bottle)
Tax
(Dollars per
bottle)
10
0
To see the impact of the tax, enter the value of the tax in the Tax field. By entering the after-tax
equilibrium quantity in the corresponding box, you will move the green line to the after-tax
equilibrium. By entering 0 in the Tax field, you will see a tax wedge between the price buyers pay
and the price sellers receive.
When the government imposes a $8-per-bottle tax on suppliers, the equilibrium quantity of gin is
and the government collects
in tax revenue.

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