Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Textbook Question
Chapter 4, Problem 11CQ
What is the nature of the deadweight loss accompanying taxes? Why is it often referred to as an “excess burden”?
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Students have asked these similar questions
Due to imposing a sugar tax, who would likely suffer a greater share of the deadweight loss – the consumer or producer? Explain.
Consider the market below where the government has imposed a $12 excise tax on this
product.
P
$33
$24
$18
$15
$12
$3
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B
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QE₁
18
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E
Siafter tax
So before tax
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Q
QE₂
QE。
30
42
What area on the graph represents the total amount of DEADWEIGHT LOSS that results from
the imposition of the tax?
if deadweight loss is $24,000 under a tax of $4 per unit, what is deadweight loss under a tax of $2 per unit?
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Economics: Private and Public Choice
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- Based on your knowledge of the price elasticity of demand, do you think the deadweight loss of a soda/junk-food tax would be relatively large or relatively small?arrow_forwardThe annual demand for imported oranges is given by the following equation:QD = 600,000 − 30,000Pwhere P is the price per kilogram and QD is quantity of kilograms demanded per year.The supply of imported oranges is given by the equation:QS = 20,000P Calculate the following: i. the excess burden of the taxarrow_forwardThe market demand for super-sticky glue is Q = 340 - 6P and the market supply is Q= 340 + 2P. a. Calculate the deadweight loss of a tax of GHS4 levied on producers of super-sticky glue. per unit b. How does deadweight ioss change if the tax is levied on consumers of super-sticky glue?arrow_forward
- What happens to the deadweight loss and taxrevenue when a tax is increased?arrow_forwardExplain why the imposition of the price ceiling does not result in a deadweight loss.arrow_forwardSuppose demand for good X is given by QD = 900- p/2 where p is the price and QD the quantity demanded. Supply is given by QS = p/4.Suppose 60 TL tax is imposed on each unit of X that is purchased.What is the burden of the tax? Explain the key factors that determine the incidence of the tax.arrow_forward
- Question attachedarrow_forwardiven the following information QD = 240-5P QS= P Where QD is the quantity demanded, Qs is the quantity supplied and P is the price. Suppose the government decides to impose a tax of $12 per unit on sellers in this market. Determine the deadweight loss of the taxarrow_forwardSuppose there is only one movie theatre in a town and the equilibrium price and quantity for movie admissions is 7 TL and 940 visits per week. Now suppose the government imposes a tax of 3 TL per movie admission, and the new equilibrium price and quantity are 8.75 TL and 750 visits per week. What is the total burden of this tax?arrow_forward
- Suppose that in the market for toys, the price of a toy is $24, the quantity sold is 96, the demand elasticity is ηd = −1, and the supply elasticity is ηs = 1. Consider the impacts of a $8 tax. (a) How much of this tax is paid by consumers? How much by producers?(b) What is the deadweight loss created by this tax?arrow_forwardCould I have help figuring out how to solve this practice problem?arrow_forwardCurrently, there is a binding price ceiling in the market for apartment rentals. Describe an event that might occur that would make the deadweight loss in the market fall to zero without any change to government policy.arrow_forward
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