ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Question 29
When a excise tax is placed on the seller of a good:
a
the buyer is likely to pay a higher price and the seller is likely to receive a lower price from the sale of the good once the tax is considered.
b
the buyer is likely to pay a higher price and the seller is likely to receive the original price from the sale of the good once the tax is considered.
c
the buyer is likely to pay the original price and the seller is likely to receive a lower price from the sale of the good once the tax is considered.
d
the seller is likely to receive a higher price from the sale and the buyer is likely to pay a lower price for the good once the tax is considered.
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Step 1
When the excise tax is imposed on the seller, the seller will receive lower price after the tax is after the tax is considered, but the buyer may also have to pay higher price.
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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?arrow_forwardNote:- 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.arrow_forward9. 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 $40.60 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. 200 PRICE (Dollars per bottle) 160 Supply 140 120 100 14 80 Demand 60 40 20 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Bottles of wine) 180 0 Before Tax After Tax Graph Input Tool…arrow_forward
- 5. Calculating tax incidence Suppose that the U.S. government decides to charge beer producers a tax. Before the tax, 25 billion cases of beer were sold every year at a price of $5 per case. After the tax, 18 billion cases of beer are sold every year; consumers pay $6 per case, and producers receive $3 per case (after paying the tax). The amount of the tax on a case of beer is S per case. Of this amount, the burden that falls on consumers is per case, and the burden that falls on producers is S per case. True or Falser The effect of the tax on the quantity sold would have been the same as if the tax had been levied on consumers. True O Falsearrow_forward5. Calculating tax incidence Suppose that the local government of Raleigh decides to institute a tax on soda producers. Before the tax, 25 million liters of soda were sold every month at a price of $11 per liter. After the tax, 19 million liters of soda are sold every month; consumers pay $16 per liter, and producers receive $7 per liter (after paying the tax). The amount of the tax on a liter of soda is 3 that falls on producers is 5 per liter. O True per liter. Of this amount, the burden that falls on consumers is True or False: The effect of the tax on the quantity sold would have been the same as if the tax had been levied on consumers. False per liter, and the burdenarrow_forward4 Is it true, as many people claim, that taxes assessed on producers are passed along to consumers? That is, do consumers pay for the entire tax?arrow_forward
- 50 Price (P) S2 (after tax) S; (before tax) Tax i of $35 $30 $25 $20 E 90 100 Quantity (Q) The diagram above shows a market before and after an excise tax has been levied by the government. The diagram indicates the effective price (net of tax) that sellers receive after the tax is: Select one: а. $35 b. $20 c. $25 d. $30arrow_forward(Figure: Determining Tax Burdens) Based on the graph, the original market price is $4. The graph depicts a tax of with a corresponding deadweight loss of Price ($) 98765432 T X D 0 50 100 150 200 250 300 350 400 450 500 550 600 Quantity $6; $3 $3; $150 $6; 50 units $3; $75arrow_forward7arrow_forward
- If a tax is levied on the buyers of a product, the tax burden will fall entirely on the buyers. A.) False B.) Truearrow_forward11. Taxation - An Algebraic Approacharrow_forwardFigure 4-5. The graph shows the impact of an excise tax. Price $2.00 1.50 1.00 .50 B A M E H K I 350 F 500 Quantity tax G Stax $1.00 for consumers and $0.50 for producers $1.00 for consumers and $1.00 for producers. $0.25 for consumers and $0.75 for producers. $0.50 for consumers and $0.50 for producers. S DSR Refer to Figure 4-5. The amount of the actual tax burden paid by consumers and producers isarrow_forward
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