Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 8, Problem 1PA
Sub part (a):
To determine
The impact of tax on pizza.
Sub part (b):
To determine
The impact of tax on pizza.
Sub part (c):
To determine
The impact of tax on pizza.
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(e) (i) Calculate the consumer surplus after the tax.
Suppose that the government imposes a tax on cigarettes. Use the diagram below to answer the
questions. D is the demand curve before tax, S is the supply curve before tax and ST is the supply curve
after the tax.
Answer:
Answer
Price
S-
18
Question 18
12
10
(e) (ii) Calculate the producer surplus after the tax.
Answer:
10 12
Qua
Answer
Question 19
(e) (ii) Tax revenue.
Answer:
Question 20
Price received by producers
(e) (iv) Deadweight loss
Quantity of cigarettes sold
Answer:
Price paid by consumers
Answer
the tax
Question 21
(e) (v) Total surplus after tax
Answer:
S PhotoGrid
2. Using the following graph, answer the following questions. Also, show/Label your answers
for parts a-e on the graph as well.
Price
20
18
16
14
12
10
6.
4 6 8 10 12 14 16 Quantity
2
a. Suppose a $4 per-unit tax is imposed on the sellers of this good. What price will buyers pay
for the good after the tax is imposed?
b. Suppose a $4 per-unit tax is imposed on the sellers of this good. How much is the burden of
this tax on the buyers in this market?
I need both questions
Chapter 8 Solutions
Essentials of Economics (MindTap Course List)
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- Suppose the current equilibrium price of cheese pizzas is $10.00, and 11 million pizzas are sold per month. After the federal government imposes a $3.00 per pizza tax, the equilibrium price of pizzas rises to $12.00, and the equilibrium quantity falls to 9 million. Compare the economic surplus in this market when there is no tax to when there is a tax on pizza. With the tax, the change in economic surplus is O A. the new surplus equal to the area under the demand curve and above the supply curve for the market equilibrium quantity. B. the deadweight loss equal to the area under the demand curve and above the supply curve for units between the quantity with the tax and market equilibrium quantity. O C. the deadweight loss equal to the area under the demand curve and above the supply curve for the quantity with the tax. D. the new surplus equal to the area under the demand curve and above the supply curve for units between the quantity with the tax and market equilibrium quantity. New…arrow_forwardThe market supply and demand for a product are shown in the diagram below. Now supose the government imposes a per-unit tax of $1 on producers. (i) What happens to total revenue received by producers after they pay the tax to the government? Explain. (ii) Will producer surplus increase, decrease, or stay the same? (iii) Will total surplus increase, decrease, or stay the same? Explain.arrow_forward(a) Show the market for housing in equilibrium on a diagram, where demand is less elastic than supply, andlabel the respective consumer and producer surpluses. Discuss whether this market is Pareto efficient. (b) Assume that the State Government imposes a per-unit tax on the sellers of houses. A new diagram,shows the imposition of this tax on the market for housing. Does the imposition of this tax cause a Paretoimprovement to the market, explain? (c) Is the tax imposed in part (b) effective for the collection of Government revenue? Justify your answer withreference to your diagram in part (b).arrow_forward
- Question 27 When the government places a tax on the producer of a good or service O both the supply and demand curves for the good or service shifts to the left. the supply curve for the good or service shifts to the right. O the demand curve for the good or service shifts to the right. the supply curve for the good or service shifts to the left. the demand curve for the good or service shifts to the left.arrow_forwardQUESTION 5 Consider the following demand and supply curves Demand: P = 50+i-70, Supply: P=wages + 30 Where i is income and wis wages If the government places a 10-dollar tax on producers, what would be the resulting consumer surplus?arrow_forwardWhat happens to consumer and producer surplus when the sale of a good is taxed? How doesthe change in consumer and producer surplus compare to the situation when good is not taxed?Explain with the help of graphs.arrow_forward
- Use the graph to answer the following question: Which of the following statements is most true? A) Producers will pay the entire tax. B) Consumers will pay 1/3 of the tax. C) Producers will pay 1/3 of the tax. D) Consumers will pay the entire tax.arrow_forwardGive typing answer with explanation and conclusion to all parts 1. Suppose that the demand curve for wheat is Q = 200 – 20p and the supply curve is Q = 20p. The government provides producers with a specific subsidy of s = $2 per unit. a. How do the equilibrium price and quantity change? b. What effect does the tax have on consumer surplus, producer surplus, government revenue, and deadweight loss.arrow_forwardSuppose the current equilibrium price of cheese pizzas is $9.00, and 11 million pizzas are sold per month. After the federal government imposes a $3.00 per pizza tax, the equilibrium price of pizzas rises to $10.00, and the equilibrium quantity falls to 9 million. Compare the economic surplus in this market when there is no tax to when there is a tax on pizza. With the tax, the change in economic surplus is A. the new surplus equal to the area under the demand curve and above the supply curve for units between the quantity with the tax and market equilibrium quantity. B. the deadweight loss equal to the area under the demand curve and above the supply curve for units between the quantity with the tax and market equilibrium quantity. C. the new surplus equal to the area under the demand curve and above the supply curve for the market equilibrium quantity. D. the deadweight loss equal to the area under the demand curve and above the supply curve for the quantity with the tax. New…arrow_forward
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