ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question 3 - Taxation
Suppose the federal government requires beer drinkers to pay a $2 tax on each case of beer
purchased.
(a) Draw a supply-and-demand diagram of the market for beer without the tax. Show the
price paid by consumers, the price received by producers, and the quantity of beer sold.
What is the difference between the price paid by consumers and the price received by
producers?
(b) Now draw a supply-and-demand diagram for the beer market with the tax. Show the
price paid by consumers, the price received by producers, and the quantity of beer sold.
What is the difference between the price paid by consumers and the price received by
producers? Has the quantity of beer sold increased or decreased?
(c) Can you identify any government revenues?
(d) Is there any inefficiency, and if so, can you define it and label it on the graph?
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Transcribed Image Text:Question 3 - Taxation Suppose the federal government requires beer drinkers to pay a $2 tax on each case of beer purchased. (a) Draw a supply-and-demand diagram of the market for beer without the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers? (b) Now draw a supply-and-demand diagram for the beer market with the tax. Show the price paid by consumers, the price received by producers, and the quantity of beer sold. What is the difference between the price paid by consumers and the price received by producers? Has the quantity of beer sold increased or decreased? (c) Can you identify any government revenues? (d) Is there any inefficiency, and if so, can you define it and label it on the graph?
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