11 ### 11. The Laffer CurveGovernment-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections.To understand the effect of such a tax, consider the monthly market for cigarettes. With no tax, the equilibrium quantity is 100 packs. The following table shows the equilibrium quantity produced and sold in the market for various per unit taxes.| Tax (Dollars per pack) | Quantity (Packs) ||------------------------|------------------|| 0 | 100 || 4 | 80 || 8 | 60 || 10 | 50 || 12 | 40 || 16 | 20 || 20 | 0 |Suppose the government imposes a $4-per-pack tax on suppliers.At this tax amount, the equilibrium quantity of cigarettes is ___ packs, and the government collects $___ in tax revenue. ### Understanding the Laffer Curve and Tax Revenue#### Exercise Instructions:Now calculate the government's tax revenue if it sets a tax of $0, $4, $8, $10, $12, $16, or $20 per pack. Using the data you generate, plot a Laffer curve by using the green points (triangle symbol) to plot total tax revenue at each of those tax levels.**Note**: Plot your points in the order in which you would like them connected. Line segments will connect the points automatically.#### Graph Explanation:- **Graph Title**: Laffer Curve- **X-Axis**: TAX REVENUE (Dollars)- **Y-Axis**: TAX RATE (Dollars per pack)- **Plotting Points**: Ensure to use green triangles to indicate the data points for each tax level and connect them to visualize the Laffer curve.The Laffer Curve illustrates the relationship between tax rates and tax revenue. The curve typically suggests that there is an optimal tax rate that maximizes tax revenue.#### Additional Question:Suppose the government is currently imposing a $12-per-pack tax on cigarettes.**True or False**: The government can raise its tax revenue by increasing the per-unit tax on cigarettes.- [ ] True- [ ] False*(Please select the correct answer based on your understanding of the Laffer Curve concept.)*### Diagram Analysis:- The **Laffer Curve Diagram** on the left remains blank for now. As you generate the tax revenue data points for the different tax rates ($0, $4, $8, $10, $12, $16, $20), you will plot these on the graph.- On the X-axis, you will plot the TAX REVENUE in Dollars, starting from 0 up to the maximum possible revenue.- On the Y-axis, you will plot the TAX RATE in Dollars per pack, ranging from 0 to 20. Analyzing and understanding this graph will help you determine how changes in tax rates can impact the total tax revenue, allowing you to answer whether increasing the tax rate will indeed raise total revenue.**Note**: The practical implementation of this exercise requires you to gather and calculate the revenue data for the specified tax rates.By completing this exercise, you will gain a deeper understanding of economic principles related to taxation and government revenue, encapsulated by the Laffer Curve.

Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for cigarettes. With no tax, the equilibrium quantity is 100 packs. The following table shows the equilibrium quantity produced and sold in the market for various per unit taxes. Таx Quantity (Dollars per pack) (Packs) 100 4 80 60 10 50 12 40 16 20 20 Suppose the government imposes a $4-per-pack tax on suppliers. At this tax amount, the equilibrium quantity of cigarettes is packs, and the government collects $ in tax revenue.

Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for cigarettes. With no tax, the equilibrium quantity is 100 packs. The following table shows the equilibrium quantity produced and sold in the market for various per unit taxes. Таx Quantity (Dollars per pack) (Packs) 100 4 80 60 10 50 12 40 16 20 20 Suppose the government imposes a $4-per-pack tax on suppliers. At this tax amount, the equilibrium quantity of cigarettes is packs, and the government collects $ in tax revenue.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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