Principles Of Economics, Ap Edition, 9781337292603, 1337292605, 2018
8th Edition
ISBN: 9781337292603
Author: Mankiw
Publisher: Cengage Learning (2018)
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Chapter 8, Problem 5PA
To determine
The pros and cons of taxing food to raise tax revenue.
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Suppose the price elasticity of demand for smartphones is 0.5 (absolute value), while the price elasticity of supply is 1.9. If the government imposes a per-unit tax of $100 on the sellers of smartphones, how will the price and quantity transacted of smartphones change? Will the sellers or the buyers bear a larger tax burden? Will the market be able to achieve economic efficiency after the tax is imposed? Explain with a diagram.
After economics class one day, your friend suggests that taxing food would be a good way to raise revenue because the demand for food is quite inelastic. In what sense is taxing food a “good” way to raise revenue? In what sense is it not a “good” way to raise revenue?
why do comsumers pay the tax on goods if the elasticity of demand is less than the elasticty of supply?
Chapter 8 Solutions
Principles Of Economics, Ap Edition, 9781337292603, 1337292605, 2018
Ch. 8.1 - Prob. 1QQCh. 8.2 - The demand for beer is more elastic than the...Ch. 8.3 - Prob. 3QQCh. 8 - Prob. 1CQQCh. 8 - Prob. 2CQQCh. 8 - Prob. 3CQQCh. 8 - Prob. 4CQQCh. 8 - Prob. 5CQQCh. 8 - Prob. 6CQQCh. 8 - Prob. 1QR
Ch. 8 - Prob. 2QRCh. 8 - Prob. 3QRCh. 8 - Why do experts disagree about whether labor taxes...Ch. 8 - What happens to the deadweight loss and tax...Ch. 8 - Prob. 1PACh. 8 - Prob. 2PACh. 8 - Prob. 3PACh. 8 - Prob. 4PACh. 8 - Prob. 5PACh. 8 - Prob. 6PACh. 8 - Prob. 7PACh. 8 - Prob. 8PACh. 8 - Prob. 9PACh. 8 - Prob. 10PA
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- Suppose the supply curve for cars is more elastic than the demand curve for cars. If the government imposes a tax on car sellers, which party (buyers or sellers) will bear more of the tax burden? How will the tax burden change if the government imposed the tax on car buyers, rather than sellers?arrow_forwardWe discussed rent control in class this semester. When there is rent control in the market for housing, we expect the supply of rental housing to be more elastic in the long run than in the short run. Which of the following is true based on the above statement about rent control and the supply of rental housing? a. In the short run, there will be a large deadweight loss from rent control. However, the deadweight loss becomes smaller in the long run. b. The supply is inelastic in the short run because it is difficult to build lots of new housing units in a small amount of time. c. Rent control is never binding. d. The number of rental housing decreases in the short run but increases in the long run. e. None of the above.arrow_forwardConsider the market for BP gasoline. If the market has a very elastic supply and a very inelastic demand, how would the burden of a tax on BP gasoline be shared between producers and consumers? Draw a graph to support your answer.arrow_forward
- The government needs to raise revenue to subsidize the vegetable industry and wants to do so by taxing the fruit industry. Four fruit markets are summarized below. Fruit Markets Apple Banana Cherry Durian Demand P= 163-0.9Q P = 163-2.7Q P=163-3.1Q P = 163-2.7Q Supply P=6+0.8Q P=6+0.8Q P=6+4.2Q P=6+4.20 If the government imposes a $9.9 per fruit tax on one of these markets, what's the most it could earn? a. $211.06 b. $251.08 c. $856.64 d. $416.08arrow_forwardthe demand for beer is more elastic than the demand for milk. would a tax on beer or a tax on milk have a larger deadweight loss? why?arrow_forwardDaniel Patrick Moynihan, the late senator from New York, once introduced a bill that would levy a 10,000 percent tax on certain hollow-tipped bullets. A 10,000 percent tax on bullet ___ is not/is___ likely to generate a lot of revenue. Why might Senator Moynihan have proposed it? To boost the manufacturing industry of hollow-tipped bulletsTo raise revenue to support law enforcementTo discourage the use of hollow-tipped bulletsarrow_forward
- Read the following article: https://techcrunch.com/2021/02/12/will-ride-hailing-profits-ever-come/ then answer the following questions. 1. The article notes Uber had never been profitable, yet at the time Uber had a market cap above $90 billion. What gives? 2. Uber lost approximately $7 billion in accounting profits in 2020. Is Uber’s producer surplus above or below this amount? Is Uber's economic profit above or below this amount? Explain.…arrow_forwardShow what happens to the supply or demand curve in each of the following situations (only ONE curve will shift). Make sure to label all curves and markets, and show what happens to equilibrium price and quantity. Given the market for SPAM, what would happen if there is an economic boom and incomes of most consumers increased.arrow_forward35-37. The market for widgets has the following supply and demand curves: Supply: P = 10 + (1/3)Q Demand: P = 100 – (1/2)Q Initially, the market is in equilibrium at P = $46, Q = 108. Questions 35 through 37 concern this market. 35. Suppose the government opens the border to free trade in widgets and foreign suppliers have a perfectly elastic supply at a price of $40 per unit. As a result the dollar value of widget imports is: A) $0 B) $40 C) $3600 D) $4800 E) $1380 F) $1200 G) $5520 H) $4140 I) $2400 J) none of the above 36. As a result of trade (rounded to the nearest dollar) the gain to society has changed by: A) -$684 B) +$684 C) -$594 D) +$594 E) -$90 F) +$90 G) -$1278 H) +$1278 I) $0 J) None of the above 37. Suppose a new study comes out that identifies widgets as a source of a health hazard, exposure to them causes cancer. The study estimates that the total global external cost of widget production and consumption is given by the following expression: Now determine (rounded to…arrow_forward
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