In the diagram to the right, illustrating a per-unit tax equal to P₂ minus P3, tax revenue is represented by the areas excess burden of the tax is represented by areas ▼ D and E F and G E and G D and F and the P3 D F E G с Q₂ Q₁ Quantity (millions per year) Q

In the diagram to the right, illustrating a per-unit tax equal to P₂ minus P3, tax revenue is represented by the areas excess burden of the tax is represented by areas ▼ D and E F and G E and G D and F and the P3 D F E G с Q₂ Q₁ Quantity (millions per year) Q

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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12. Effect of a tax on buyers and sellers The following graph shows the daily market for wine when the tax on sellers is set at $0 per bottle. Suppose the government institutes a tax of $23.20 per bottle, to be paid by the seller. (Hint: To see the impact of the tax, enter the value of the tax in the Tax on Sellers field and move the green line to the after-tax equilibrium by adjusting the value in the Quantity field. Then enter zero in the Tax on Sellers field. You should see a tax wedge between the price buyers pay and the price sellers receive.) Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. 180 160 140 120 4 100 80 60 Demand 40 20 PRICE (Dollars per bottle) 200 0 0 Supply 50 100 150 200 250 300 350 400 450 500 QUANTITY (Bottles of wine) Graph Input Tool Market for Wine…
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Question: 2The government is interested in imposing a tax to generate revenue X. It is considering whether they should tax the consumer’s income or impose a tax on a commodity y. What should the government do if they do NOT care about consumer welfare? Use three graphs to illustrate your answer and explain those graphs in your answer.
***This is a three-part question - EACH PART requires a solution/explanation with visual representation on a GRAPH or TABLE; for the graph and table, examples of what is needed are provided*** 1. Assume that the demand for cigarettes is Qd=1600-30P and the supply of cigarettes is Qs=1400+70P. Now, suppose the government levies a $2 tax for each unit of cigarettes sold. a. ON A GRAPH, identify the tax revenue generated by this tax. Label each area on the graph with a letter. b. SHOW IN A TABLE the consumer surplus and the producer surplus before and after the tax. c. ON THE GRAPH, indicate the deadweight loss associated with this tax.
Consider the supply and demand functions graphed below. Price 100 75 70 60 10 56 Supply Demand 20 Quantity Suppose a demand-side tax is imposed. As a result of the tax, the new equilibrium quantity is 5. What is the price paid by consumers? $60 What is the price received by producers? $ How much is the tax that was imposed? How much tax revenue is collected? Which side of the market pays more of the tax? This side of the market pays more of the tax because SA A 4 4) (
FRONT PAGE State Lotteries: A Tax on the Uneducated and the Poor Americans now spend over $85 billion a year on lottery tickets. That's more than we spend on sporting events, books, video games, movies, and music combined. That spending works out to about $650 a household. Poor people are proportionally the biggest buyers of lottery tickets. Households with less than $25,000 of income spend $1,100 a year on lottery tickets. By contrast, households with more than $50,000 of income buy only $300 of lottery tickets each year. Education also affects lottery spending: 2.7 percent of high school dropouts are compulsive lottery players, while only 1.1 percent of college grads play compulsively. Because lottery games are a sucker's game to start with-payouts average less than 60 percent of sales-lotteries are effectively a regressive tax on the uneducated and the es poor. Source: Research on lottery sales. According to Front Page Economics, what percentage of income is spent on lottery tickets…
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Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Quantity Price Buyers Pay Price Sellers Receive (Bottles of wine) (Dollars per bottle) (Dollars per bottle) Before Tax After Tax Using the data you entered in the previous table, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table. Tax Burden Elasticity (Dollars per bottle) Buyers Sellers The burden of the tax falls more heavily on the __elastic side of the market.
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