3. Refer to the figure. Tax Revenue 0 M Tax Size a. What is curve from the figure called? b. If the economy is at point M on the curve, then a small increase in the tax rate will increase or decrease tax revenue? Increase or decrease deadweight loss? C. If the economy is at point N on the curve, then a decrease in the tax rate will increase or decrease tax revenue? Increase or decrease deadweight loss?

3. Refer to the figure. Tax Revenue 0 M Tax Size a. What is curve from the figure called? b. If the economy is at point M on the curve, then a small increase in the tax rate will increase or decrease tax revenue? Increase or decrease deadweight loss? C. If the economy is at point N on the curve, then a decrease in the tax rate will increase or decrease tax revenue? Increase or decrease deadweight loss?

Principles of Microeconomics

7th Edition

ISBN:9781305156050

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter8: Application: The Cost Of Taxation

Section: Chapter Questions

Problem 4CQQ

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Imagine there is a tax on cigarettes and that consumers and producers each bear some portion of the tax. Assume that when vape pens were introduced, they were not taxed. How would you expect that introduction of vape pens to affect the distribution of the tax burden associated with the cigarette tax? O It will decrease the consumer tax burden because demand for cigarettes will become more elastic. O It will increase the consumer tax burden because demand for cigarettes will become more elastic. O It will decrease the consumer tax burden because demand for cigarettes will become more inelastic. O It will increase the consumer tax burden because demand for cigarettes will become more inelastic.
Figure 8-23. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. 6 on4m21 3 Tax Revenue B Tax Size Refer to Figure 8-23. If the economy is at point A on the curve, then a small increase in the tax rate will O increase the deadweight loss of the tax and increase tax revenue. O increase the deadweight loss of the tax and decrease tax revenue. decrease the deadweight loss of the tax and increase tax revenue. O decrease the deadweight loss of the tax and decrease tax revenue.
After the excise tax is imposed, what is the new equilibrium quantity of sofas? d. What is the total amount of revenue collected by the government from the excise tax on sofas?
Figure 8-24. The figure represents the relationship between the size of a tax and the tax revenue raised by that tax. Tax Revenue F 765YMN1 Refer to Figure 8-24. For an economy that is currently at point D on the curve, a decrease in the tax rate would a decrease consumer surplus. b. decrease producer surplus. c. increase tax revenue. d. increase the deadweight loss of the tax. Tax Size
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 commodities
5. Draw supply and demand curve and answer the following questions: (a) Suppose the supply of tobacco is elastic and the demand for tobacco is inelas- tic. If an excise tax is levied on the suppliers of tobacco, will the incidence of the tax fall mostly on consumers or mostly on producers? (b) If the demand is relatively more inelastic than before, will the DWL rise or fall? Will tax revenue from the tobacco tax fall or rise? (You must draw the supply and demand curve) Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.
c. Compared to the short-run effect of an increase in the excise tax on gasoline, the long-run effect of an increase in the excise tax has a demanded of gasoline; it reduces consumption of gasoline by a tax revenue for the federal government. amount, and it generates a A. larger; smaller; smaller OB. smaller, larger; smaller C. smaller, smaller, larger OD. larger; larger; smaller effect on the quantity
If the government wants to increase the tax revenue they collect from sellers, then it should O Tax goods that have low elasticity of demand and high elasticity of supply. O Tax goods that have high elasticity of demand and supply. Tax goods that have high elasticity of demand and low elasticity of supply. O Tax goods that have low elasticity of demand and supply.
Suppose that the government imposes a tax onheating oil.a. Would the deadweight loss from this tax likely begreater in the first year after it is imposed or in thefifth year? Explain.b. Would the revenue collected from this tax likely begreater in the first year after it is imposed or in thefifth year? Explain.
Government levied a tax on good A. The less elastic the demand is, the greater or the smaller the tax burden consumers bear? Also, is the after-tax equilibrium quantity the greater or smaller? Consumers’ tax burden: After-tax equilibrium quantity:
5. Calculating tax incidence Suppose that the U.S. government decides to charge cola consumers a tax. Before the tax, 40 billion cases of cola were sold every year at a price of $7 per case. After the tax, 34 billion cases of cola are sold every year; consumers pay $8 per case (induding the tax), and producers receive $4 per case. per case, and the The amount of the tax on a case of cola isS per case. Of this amount, the burden that falls on consumers is S burden that falls on producers is s per case. True or False: The effect of the tax on the quantity sold would have been larger if the tax had been levied on producers. O True O False
2. Draw a supply and demand curve and show the equilibrium price and quantity. Explain graphically in the same diagram what happens to the equilibrium price and quantity if there is an expectation of higher future prices of the product and there is an increase in taxation of the product in the economy?