The deadweight loss of tax on a commodity.

Question

Want to see more full solutions like this?

Answer 1

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 8, Problem 1CQQ

To determine

The deadweight loss of tax on a commodity.

Expert Solution & Answer

Answer to Problem 1CQQ

Option 'a' is correct.

Explanation of Solution

The tax is the unilateral payment from the people to the government. Tax is the main source of income of the government which can be used for carrying on the public expenditure of the government. The main types of taxes includes the income tax, wealth tax and the professional tax.

When a tax is imposed on the commodity, it will lead to an increase in the price from the equilibrium level and the price to the consumer rises which will reduce the consumer surplus. The price received by the sellers also decline which will reduce the producer surplus in the economy. Thus, the total surplus which is the summation of the consumer surplus and the producer surplus will fall. This fall in the total surplus due to taxation is known as the deadweight loss due to tax.

Option (a):

The tax increases the price of the commodity and reduces the consumer surplus as well as the producer surplus because it increases the price paid by the consumer and reduces the price received by the producer. When the reduction in the total surplus which is the summation of the consumer and producer surplus is higher than the total revenue generated from the taxation, there will be deadweight loss due to the tax on the commodity. Thus, option 'a' is correct.

Option (b):

When the reduction in the total surplus which is the summation of the consumer and producer surplus is higher than the total revenue generated from the taxation, there will be deadweight loss due to the tax on the commodity. Since, option 'b' explains the inverse of the actual situation, option 'b' is incorrect.

Option (c):

The tax increases the price of the commodity and reduces the consumer surplus as well as the producer surplus because it increases the price paid by the consumer and reduces the price received by the producer. The fall in the total surplus is known as the deadweight loss. Since, the total surplus is the summation of the consumer and the producer surplus, option 'c' is incorrect.

Option (d):

The fall in the total surplus is known as the deadweight loss and since the total surplus is the summation of the consumer and the producer surplus, a fall in any one of them will lead to deadweight loss and thus, option 'd' is incorrect.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are different types of taxes in the economy which includes the income tax, property tax and professional tax and so on.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Students have asked these similar questions

not use ai please

Before the Civil War, the South traded with the North and with England. The South sold cotton and bought manufactured goods and food. During the war, one of President Lincoln's first actions was a blockade of the ports in the South to prevent this trade. The South had to increase its production of munitions and food. Draw a point to show the South's production point prior to the Civil War. Label it 1. Draw a point to show the South's consumption point prior to the Civil War. Label it 2. During the war, the South's factors of production were severely depleted and its production possibilities decreased. Draw a curve that shows the effects of the Civil War on the South's PPF. Label it PPF₁. Draw a point to show the South's production point during the Civil War. Label it 3. During the war, the South did not engage in trade. Draw a point to show the South's consumption point during the Civil War. Label it 4. 100 80- 60- Other goods and services (units) ☑ 40- 20- 200 400 600 PPF 800 1000…

Suppose that a paper mill "feeds" a downstream box mill. For the downstream mill, the marginal profitability of producing boxes declines with volume. For example, the first unit of boxes increases earnings by $10, the second by $9, the third by $8, and so on, until the tenth unit increases profit by just $1. The cost the upstream mill incurs for producing enough paper (one "unit" of paper) to make one unit of boxes is $3.50. Assume the two mills operate as separate profit centers, and the paper mill sets the price of paper. It follows that the marginal profitability of boxes represents the highest price that the box division would be willing to pay the paper division for boxes.. Furthermore, assume that fixed costs are $0 for the paper mill. The following table summarizes the quantity, total revenue, and marginal costs from the perspective of the paper mill for selling paper to the box mill at various prices. In the following table, fill in the marginal revenue, total cost, and total…

Answer 2

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 8, Problem 1CQQ

To determine

The deadweight loss of tax on a commodity.

Expert Solution & Answer

Answer to Problem 1CQQ

Option 'a' is correct.

Explanation of Solution

The tax is the unilateral payment from the people to the government. Tax is the main source of income of the government which can be used for carrying on the public expenditure of the government. The main types of taxes includes the income tax, wealth tax and the professional tax.

When a tax is imposed on the commodity, it will lead to an increase in the price from the equilibrium level and the price to the consumer rises which will reduce the consumer surplus. The price received by the sellers also decline which will reduce the producer surplus in the economy. Thus, the total surplus which is the summation of the consumer surplus and the producer surplus will fall. This fall in the total surplus due to taxation is known as the deadweight loss due to tax.

Option (a):

The tax increases the price of the commodity and reduces the consumer surplus as well as the producer surplus because it increases the price paid by the consumer and reduces the price received by the producer. When the reduction in the total surplus which is the summation of the consumer and producer surplus is higher than the total revenue generated from the taxation, there will be deadweight loss due to the tax on the commodity. Thus, option 'a' is correct.

Option (b):

When the reduction in the total surplus which is the summation of the consumer and producer surplus is higher than the total revenue generated from the taxation, there will be deadweight loss due to the tax on the commodity. Since, option 'b' explains the inverse of the actual situation, option 'b' is incorrect.

Option (c):

The tax increases the price of the commodity and reduces the consumer surplus as well as the producer surplus because it increases the price paid by the consumer and reduces the price received by the producer. The fall in the total surplus is known as the deadweight loss. Since, the total surplus is the summation of the consumer and the producer surplus, option 'c' is incorrect.

Option (d):

The fall in the total surplus is known as the deadweight loss and since the total surplus is the summation of the consumer and the producer surplus, a fall in any one of them will lead to deadweight loss and thus, option 'd' is incorrect.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are different types of taxes in the economy which includes the income tax, property tax and professional tax and so on.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 3

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 8, Problem 1CQQ

To determine

The deadweight loss of tax on a commodity.

Expert Solution & Answer

Answer to Problem 1CQQ

Option 'a' is correct.

Explanation of Solution

The tax is the unilateral payment from the people to the government. Tax is the main source of income of the government which can be used for carrying on the public expenditure of the government. The main types of taxes includes the income tax, wealth tax and the professional tax.

When a tax is imposed on the commodity, it will lead to an increase in the price from the equilibrium level and the price to the consumer rises which will reduce the consumer surplus. The price received by the sellers also decline which will reduce the producer surplus in the economy. Thus, the total surplus which is the summation of the consumer surplus and the producer surplus will fall. This fall in the total surplus due to taxation is known as the deadweight loss due to tax.

Option (a):

The tax increases the price of the commodity and reduces the consumer surplus as well as the producer surplus because it increases the price paid by the consumer and reduces the price received by the producer. When the reduction in the total surplus which is the summation of the consumer and producer surplus is higher than the total revenue generated from the taxation, there will be deadweight loss due to the tax on the commodity. Thus, option 'a' is correct.

Option (b):

When the reduction in the total surplus which is the summation of the consumer and producer surplus is higher than the total revenue generated from the taxation, there will be deadweight loss due to the tax on the commodity. Since, option 'b' explains the inverse of the actual situation, option 'b' is incorrect.

Option (c):

The tax increases the price of the commodity and reduces the consumer surplus as well as the producer surplus because it increases the price paid by the consumer and reduces the price received by the producer. The fall in the total surplus is known as the deadweight loss. Since, the total surplus is the summation of the consumer and the producer surplus, option 'c' is incorrect.

Option (d):

The fall in the total surplus is known as the deadweight loss and since the total surplus is the summation of the consumer and the producer surplus, a fall in any one of them will lead to deadweight loss and thus, option 'd' is incorrect.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are different types of taxes in the economy which includes the income tax, property tax and professional tax and so on.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Definition Definition Consumer surplus is the consumers' gain from trade. The consumer surplus is the area below the demand curve but above the equilibrium price, up to the equilibrium quantity. Producer surplus is the producer's gain from trade. The producer surplus is the area above the supply curve but below the equilibrium price, up to the equilibrium quantity. Consumer surplus is represented by Area A and producer surplus is represented by Area B.

Chapter 8, Problem 1CQQ

To determine

The deadweight loss of tax on a commodity.

Expert Solution & Answer

Answer to Problem 1CQQ

Option 'a' is correct.

Explanation of Solution

The tax is the unilateral payment from the people to the government. Tax is the main source of income of the government which can be used for carrying on the public expenditure of the government. The main types of taxes includes the income tax, wealth tax and the professional tax.

When a tax is imposed on the commodity, it will lead to an increase in the price from the equilibrium level and the price to the consumer rises which will reduce the consumer surplus. The price received by the sellers also decline which will reduce the producer surplus in the economy. Thus, the total surplus which is the summation of the consumer surplus and the producer surplus will fall. This fall in the total surplus due to taxation is known as the deadweight loss due to tax.

Option (a):

The tax increases the price of the commodity and reduces the consumer surplus as well as the producer surplus because it increases the price paid by the consumer and reduces the price received by the producer. When the reduction in the total surplus which is the summation of the consumer and producer surplus is higher than the total revenue generated from the taxation, there will be deadweight loss due to the tax on the commodity. Thus, option 'a' is correct.

Option (b):

When the reduction in the total surplus which is the summation of the consumer and producer surplus is higher than the total revenue generated from the taxation, there will be deadweight loss due to the tax on the commodity. Since, option 'b' explains the inverse of the actual situation, option 'b' is incorrect.

Option (c):

The tax increases the price of the commodity and reduces the consumer surplus as well as the producer surplus because it increases the price paid by the consumer and reduces the price received by the producer. The fall in the total surplus is known as the deadweight loss. Since, the total surplus is the summation of the consumer and the producer surplus, option 'c' is incorrect.

Option (d):

The fall in the total surplus is known as the deadweight loss and since the total surplus is the summation of the consumer and the producer surplus, a fall in any one of them will lead to deadweight loss and thus, option 'd' is incorrect.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are different types of taxes in the economy which includes the income tax, property tax and professional tax and so on.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 8, Problem 1CQQ

To determine

The deadweight loss of tax on a commodity.

Expert Solution & Answer

Answer to Problem 1CQQ

Option 'a' is correct.

Explanation of Solution

The tax is the unilateral payment from the people to the government. Tax is the main source of income of the government which can be used for carrying on the public expenditure of the government. The main types of taxes includes the income tax, wealth tax and the professional tax.

When a tax is imposed on the commodity, it will lead to an increase in the price from the equilibrium level and the price to the consumer rises which will reduce the consumer surplus. The price received by the sellers also decline which will reduce the producer surplus in the economy. Thus, the total surplus which is the summation of the consumer surplus and the producer surplus will fall. This fall in the total surplus due to taxation is known as the deadweight loss due to tax.

Option (a):

The tax increases the price of the commodity and reduces the consumer surplus as well as the producer surplus because it increases the price paid by the consumer and reduces the price received by the producer. When the reduction in the total surplus which is the summation of the consumer and producer surplus is higher than the total revenue generated from the taxation, there will be deadweight loss due to the tax on the commodity. Thus, option 'a' is correct.

Option (b):

When the reduction in the total surplus which is the summation of the consumer and producer surplus is higher than the total revenue generated from the taxation, there will be deadweight loss due to the tax on the commodity. Since, option 'b' explains the inverse of the actual situation, option 'b' is incorrect.

Option (c):

The tax increases the price of the commodity and reduces the consumer surplus as well as the producer surplus because it increases the price paid by the consumer and reduces the price received by the producer. The fall in the total surplus is known as the deadweight loss. Since, the total surplus is the summation of the consumer and the producer surplus, option 'c' is incorrect.

Option (d):

The fall in the total surplus is known as the deadweight loss and since the total surplus is the summation of the consumer and the producer surplus, a fall in any one of them will lead to deadweight loss and thus, option 'd' is incorrect.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are different types of taxes in the economy which includes the income tax, property tax and professional tax and so on.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Answer 6

Chapter 8, Problem 1CQQ

To determine

The deadweight loss of tax on a commodity.

Expert Solution & Answer

Answer to Problem 1CQQ

Option 'a' is correct.

Explanation of Solution

The tax is the unilateral payment from the people to the government. Tax is the main source of income of the government which can be used for carrying on the public expenditure of the government. The main types of taxes includes the income tax, wealth tax and the professional tax.

When a tax is imposed on the commodity, it will lead to an increase in the price from the equilibrium level and the price to the consumer rises which will reduce the consumer surplus. The price received by the sellers also decline which will reduce the producer surplus in the economy. Thus, the total surplus which is the summation of the consumer surplus and the producer surplus will fall. This fall in the total surplus due to taxation is known as the deadweight loss due to tax.

Option (a):

The tax increases the price of the commodity and reduces the consumer surplus as well as the producer surplus because it increases the price paid by the consumer and reduces the price received by the producer. When the reduction in the total surplus which is the summation of the consumer and producer surplus is higher than the total revenue generated from the taxation, there will be deadweight loss due to the tax on the commodity. Thus, option 'a' is correct.

Option (b):

When the reduction in the total surplus which is the summation of the consumer and producer surplus is higher than the total revenue generated from the taxation, there will be deadweight loss due to the tax on the commodity. Since, option 'b' explains the inverse of the actual situation, option 'b' is incorrect.

Option (c):

The tax increases the price of the commodity and reduces the consumer surplus as well as the producer surplus because it increases the price paid by the consumer and reduces the price received by the producer. The fall in the total surplus is known as the deadweight loss. Since, the total surplus is the summation of the consumer and the producer surplus, option 'c' is incorrect.

Option (d):

The fall in the total surplus is known as the deadweight loss and since the total surplus is the summation of the consumer and the producer surplus, a fall in any one of them will lead to deadweight loss and thus, option 'd' is incorrect.

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are different types of taxes in the economy which includes the income tax, property tax and professional tax and so on.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Answer 7

Chapter 8, Problem 1CQQ

To determine

The deadweight loss of tax on a commodity.

Answer 8

Expert Solution & Answer

Answer to Problem 1CQQ

Option 'a' is correct.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

The tax is the unilateral payment from the people to the government. Tax is the main source of income of the government which can be used for carrying on the public expenditure of the government. The main types of taxes includes the income tax, wealth tax and the professional tax.

When a tax is imposed on the commodity, it will lead to an increase in the price from the equilibrium level and the price to the consumer rises which will reduce the consumer surplus. The price received by the sellers also decline which will reduce the producer surplus in the economy. Thus, the total surplus which is the summation of the consumer surplus and the producer surplus will fall. This fall in the total surplus due to taxation is known as the deadweight loss due to tax.

Option (a):

The tax increases the price of the commodity and reduces the consumer surplus as well as the producer surplus because it increases the price paid by the consumer and reduces the price received by the producer. When the reduction in the total surplus which is the summation of the consumer and producer surplus is higher than the total revenue generated from the taxation, there will be deadweight loss due to the tax on the commodity. Thus, option 'a' is correct.

Option (b):

When the reduction in the total surplus which is the summation of the consumer and producer surplus is higher than the total revenue generated from the taxation, there will be deadweight loss due to the tax on the commodity. Since, option 'b' explains the inverse of the actual situation, option 'b' is incorrect.

Option (c):

The tax increases the price of the commodity and reduces the consumer surplus as well as the producer surplus because it increases the price paid by the consumer and reduces the price received by the producer. The fall in the total surplus is known as the deadweight loss. Since, the total surplus is the summation of the consumer and the producer surplus, option 'c' is incorrect.

Option (d):

The fall in the total surplus is known as the deadweight loss and since the total surplus is the summation of the consumer and the producer surplus, a fall in any one of them will lead to deadweight loss and thus, option 'd' is incorrect.

Answer 12

Economics Concept Introduction

Concept introduction:

Tax: It is the unilateral payment made by the public towards the government. There are different types of taxes in the economy which includes the income tax, property tax and professional tax and so on.

Deadweight loss: It is the reduction in the units where the marginal benefit to the consumer is higher than the marginal cost of production of the unit.

Answer 13

Ch. 8.1 - Prob. 1QQ Ch. 8.2 - The demand for beer is more elastic than the...Ch. 8.3 - Prob. 3QQ Ch. 8 - Prob. 1CQQ Ch. 8 - Prob. 2CQQ Ch. 8 - Prob. 3CQQ Ch. 8 - Prob. 4CQQ Ch. 8 - Prob. 5CQQ Ch. 8 - Prob. 6CQQ Ch. 8 - Prob. 1QR

The deadweight loss of tax on a commodity.

The deadweight loss of tax on a commodity.

Answer to Problem 1CQQ

Explanation of Solution

Want to see more full solutions like this?

Chapter 8 Solutions