Principles of Microeconomics
7th Edition
ISBN: 9781305156050
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 12, Problem 7PA
To determine
Increase in the tax revenue.
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Chapter 12 Solutions
Principles of Microeconomics
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- If a tax of $0.90 is imposed, what is the tax revenue?arrow_forwardSuppose that your state raises its sales tax from5 percent to 6 percent The state revenue commissionerlo~asts a 20 percent increase in sales tax revenue.Is this plausible? Explain.arrow_forwardAlcohol and tobacco are products that contribute the most to the feral government’s tax revenue. Use the concept of elasticity to explain why.arrow_forward
- Suppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively. Suppose the government imposes a per-unit tax on the cigarette sellers. Who, buyers or sellers, would share a heavier tax burden? Explain your answers without calculation.arrow_forwardQ)Economics If the tax elasticity of supply is 0.16, by how much will the quantity supplied increase when the marginal tax rate decreases from 40 to 36 percent?arrow_forwardWhat are the consequences of an increase in direct taxation?arrow_forward
- Please answer fastarrow_forwardSuppose in the market for cigarettes, the price elasticity of supply is 2.4 and the price elasticity of demand is −0.8. If an excise tax is imposed on sellers of cigarettes, then _____. a buyers and sellers will pay equal shares of the tax b buyers will pay a greater share of the tax than sellers will c buyers will pay the whole tax d sellers will pay a greater share of the tax than buyers will e sellers will pay the whole taxarrow_forwardDo you think profit could be maintained if the tax burden were simply passed on to the consumers in the form of higher selling price? How will this affect sales? Explain.arrow_forward
- Suppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively. Suppose the government imposes a per-unit tax of $45 Some economists believe that a sales tax, in general, is undesirable. Explain. Despite this, why do most countries still impose a tax on cigarette? Explain plausible arguments.arrow_forwardNow suppose that the price elasticity of demand is 1, price elasticity of supply is 2, and a 25 % excise tax is levied on consumers. Which of the following changes in a market will reduce the burden of the tax on consumers? Elasticity of demand rises to 2. Nothing will change the burden of the tax. Elasticity of demand falls to 0. Taxing authorities levy the tax on suppliers.arrow_forwardIn the diagram to the right, illustrating a per-unit tax equal to P, minus P3, tax and the excess burden of the tax revenue is represented by the areas S2 is represented by areas P2 B D A F Quantity (millions per year) Price (dollars per unit)arrow_forward
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