Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506893
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 4, Problem 11CQ
What is the nature of the
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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.
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$24
$18
$15
$12
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B
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F
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Siafter tax
So before tax
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Q
QE₂
QE。
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What area on the graph represents the total amount of DEADWEIGHT LOSS that results from
the imposition of the tax?
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?
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Microeconomics: Private and Public Choice (MindTap Course List)
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- The 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_forwardWhat 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_forward
- Suppose 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_forwardQuestion 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_forward
- Suppose 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_forwardSuppose 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_forward
- Currently, 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_forwardThe following graph represents the demand and supply for blinkies (an imaginary product). The black point (plus symbol) indicates the pre-tax equilibrium. Suppose the government has just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario. PRICE (Dollars per blinkie) 22.00 Demand 28.00– 16.00 A B D F MOI UM I I E 24 36 QUANTITY (Blinkies) Complete the following table, given the information presented on the graph. Result Equilibrium quantity after tax Per-unit tax Price producers receive after tax $ $ Value Supply Concept Deadweight loss after the tax is imposed In the following table, indicate which areas on the previous graph correspond to each concept. Check all that apply. Consumer surplus before the tax is imposed Producer surplus after the tax is imposed A B 000 □ [] 0 OOO DE □ □ C C (?) 00 F □ 0 0arrow_forwardAssume that the monthly demand for Gala apple in the US is given by q=1200-300p and quantity is in million pounds. The monthly supply of Gala is q= -200+400p for p>$0.5. Now assume that the government has imposed a quantity tax equal to $0.14 on each pound of apple. Assume that the retail stores are legally obliged to collect this tax. What is the government revenue and deadweight loss of this tax?arrow_forward
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