Economics For Today
10th Edition
ISBN: 9781337613040
Author: Tucker
Publisher: Cengage Learning
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Chapter P2, Problem 10KC
To determine
The impact when the
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Suppose 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.
When supply is perfectly elastic, who bears the burden of tax?
Select one:
a. producers
b. consumers
c. producers and consumers
d. sellers
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- Q)Economics If the tax elasticity of supply is 0.16, by how much will the quantity supplied increase when the marginal tax rate decreases from 40 to 36 percent?arrow_forwardIdentify whether the statements about the economics of taxes are true or false. a. An excise tax can distort incentives and create missed opportunities for mutually beneficial transactions. b. When demand is elastic and supply is inelastic, the burden of a tax falls mainly on consumers. c. When demand is inelastic and supply is elastic, the burden of a tax falls mainly on producers. d. The incidence of a tax is determined by which group – buyers or sellers – must actually pay the govarrow_forwardQuestion 6 When a tax per unit is placed on the buyer of a good: a the equilibrium price falls and the total amount spent by the buyer decreases if demand is elastic. b when prices increase from the tax, the supply increases because of the higher price. c the buyer and seller share the burden of the tax with the seller receiving relatively less and the buyer paying relatively more. d the seller charges all of the tax to the buyer since the tax was not placed on the seller.arrow_forward
- Assume that the demand for coal is more elastic than the supply. A tax on coal will a. increase the price of coal paid by buyers, and sellers bear a smaller burden of the tax b. decrease the price of coal that sellers really get, and sellers have to bear a bigger burden of the tax c. decrease the price of coal paid by buyers, and buyers have to bear a bigger burden of the tax d. increase the price of coal that sellers really get, and buyers bear a smaller burden of the taxarrow_forwardSuppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.6 and 0.8 respectively. a. Suppose the government imposes a per-unit tax on the cigarette sellers. Who, buyers or sellers, would share a heavier tax burden? Explain your answers without calculation. b. Suppose the government imposes a per-unit tax of $40 on the cigarette sellers. By how much would buyers and sellers of cigarettes share the tax burden respectively? Show your calculation. c. Suppose many small sellers, such as newsstands, complain the heavy tax burden borne by them. Would it be better to these small sellers if the government decides to impose a $20 per-unit tax on both the buyers and the sellers of cigarette? Explain.arrow_forwardA tax on umbrellas will most likely Select one: a.cause a large decline in the sales of umbrellas because demand is elastic. b.be an effective way to tax those who don’t earn enough to pay income taxes. c.fall mostly on the umbrella buyers rather than the producers. d.raise large amounts of tax revenue for the government.arrow_forward
- 2. The elasticity of demand for guitars is -2.0, and the elasticity of supply is 3.0. How much will the price of guitars change with a per-unit tax of $2?arrow_forwardA per unit tax is imposed on the seller that shifts the supply curve to the left. Ceteris paribus, the greater the elasticity of demand, the ______. Select all that apply. A. smaller is the burden of the tax on the consumers. B. larger is the burden of the tax on the consumers C. smaller is the burden of the tax on the producers D. larger is the burden of the tax on the producersarrow_forwardIf a constant $1 per unit tax is imposed on producers, A. producers can always pass the tax burden to consumers by raising the price by a dollar. B. producers will pay more than $0.5 tax for each unit of the good sold if supply is less elastic than demand. C. producers will pay less than $0.5 tax for each unit of the good sold if demand is more elastic than supply. D. producers must absorb the tax themselves and cannot raise the price.arrow_forward
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