Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 8, Problem 1MCQ
To determine
To explain:
The effect on the
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Suppose that the government decides to charge cola consumers an excise tax. Before the tax, 12 million cases of cola are sold every month at a price of $3.50 per case. After the tax, 6million cases of cola are sold every month; consumers pay $4.00 per case and producers receive $2.00 per case. a. What is the excise tax on cola?b. On whom does the incidence of the tax fall more heavily?c. How much government revenue will be generated by the excise tax?
When a good is taxed, the burden of the tax fallsmainly on consumers ifa. the tax is levied on consumers.b. the tax is levied on producers.c. supply is inelastic and demand is elastic.d. supply is elastic and demand is inelastic
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Chapter 8 Solutions
Foundations of Economics (8th Edition)
Ch. 8 - Prob. 1SPPACh. 8 - Prob. 2SPPACh. 8 - Prob. 3SPPACh. 8 - Prob. 4SPPACh. 8 - Prob. 5SPPACh. 8 - Prob. 6SPPACh. 8 - Prob. 7SPPACh. 8 - Prob. 8SPPACh. 8 - Prob. 9SPPACh. 8 - Prob. 10SPPA
Ch. 8 - Prob. 1IAPACh. 8 - Prob. 2IAPACh. 8 - Prob. 3IAPACh. 8 - Prob. 4IAPACh. 8 - Prob. 5IAPACh. 8 - Prob. 6IAPACh. 8 - Prob. 7IAPACh. 8 - Prob. 8IAPACh. 8 - Prob. 9IAPACh. 8 - Prob. 10IAPACh. 8 - Prob. 1MCQCh. 8 - Prob. 2MCQCh. 8 - Prob. 3MCQCh. 8 - Prob. 4MCQCh. 8 - Prob. 5MCQCh. 8 - Prob. 6MCQCh. 8 - Prob. 7MCQCh. 8 - Prob. 8MCQ
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- Imagine the government imposes a $30 excise tax on sellers of cell phones by charging $30 for each cell phone sold. If we have normal demand and supply curves, the price of cell phones will: Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. Rise by less than $30. b Rise by more than $30. Rise by exactly $30. d Buyers of cell phones will bear the entire burden of the tax. e Sellers of cell phones will bear the entire burden of the tax.arrow_forwardSuppose that the U.S. government decides to charge cola producers a tax. Before the tax, 15 million cases of cola were sold every month at a price of $7 per case. After the tax, 9 million cases of cola are sold every month; consumers pay $10 per case, and producers receive $4 per case (after paying the tax). A. The amount of the tax on a case of cola is ___ per case B. Of this amount, the burden that falls on consumers is ___ per case C. and the burden that falls on producers is ___ per case True or False: The effect of the tax on the quantity sold would have been the same as if the tax had been levied on consumers.arrow_forwardHelp me with part by drawing graph pleasearrow_forward
- Suppose that the Australian government imposes a sales tax on a product and both buyers and sellers share the burden of the If the price elasticity of demand for the product is perfectly inelastic. Which of the following is true? Select one: a. Sellers would pay more of the tax than buyers. b. Buyers would pay all of the tax. c. Buyers and sellers would share the tax burden equally. d. Sellers would pay all the tax.arrow_forwardQuestion 2 Full explain this question and text typing work only thanksarrow_forwardThe graph shows the market for basketballs in which sellers are taxed $6 a ball. Draw a shape that shows the excess burden of the tax on basketballs. The excess burden of the tax on basketballs is $ million. The supply of basketballs is more pays most of the tax. A. elastic; seller OB. elastic; buyer OC. inelastic; buyer O D. elastic; seller than the demand for basketballs, and thearrow_forward
- 7. Taxes on particular goods discourage their consumption. Economists say that such taxes "distort consumer demands." In terms of the elasticity of demand (or elasticity of supply) for the commodities in question, what sort of goods (in terms of their elasticities) would you choose to tax to achieve the following objectives? Give an example of the type of good/product for each AND explain whether you are referring to the demand curve or the supply curve. a. Collect a large amount of tax revenue b. C. d. Distort demand as little as possible Discourage consumption of harmful commodities Discourage production of polluting commoditiesarrow_forwardSuppose 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_forwardQuestion 14 In the long run, both supply and demand tend to become more elastic. This suggests that, in the long run, the government will likely reduce tax rates. deadweight loss from a tax will be less than it is in the short run. deadweight loss from a tax will be greater than it is in the short run. deadweight loss from a tax will be zero. O revenue generated from the tax will increase.arrow_forward
- Thank you!arrow_forwardQuestion 11 Taxes will almost always cause consumer prices to increase. How much they increase depends on O who is legally obligated to pay the tax. who pays the tax out of pocket. the elasticities of supply and demand. O the amount of the tax. how often the government collects the tax.arrow_forward9. A subsidy is the opposite of a tax. With a €0.50 tax on the buyers of ice cream cornets, the government collects €0.50 for each cornet purchased; with a €0.50 subsidy for the buyers of ice cream cornets, the government pays buyers €0.50 for each cornet purchased. a. Show the effect of a €0.50 per cornet subsidy on the demand curve for ice cream cornets, the effective price paid by consumers, the effective price received by sellers and the quantity of cornets sold. b. Do consumers gain or lose from this policy? Do pro- ducers gain or lose? Does the government gain or lose?arrow_forward
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