ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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-In fact, as taxes increase, the
-The deadweight loss is the area of a triangle and the area of a triangle depends on the square of its size.
-If we double the size of a tax, the base and height of the triangle both double so the area of the triangle (the deadweight loss) rises by a factor of four.
This is an excerpt from Chapter 8: Application the Costs of
Why the deadweight loss from a tax is proportional to the square of the tax rate? I can't understand this. Could you please explain it more precisely?
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- Suppose that the U.S. government decides to charge beer producers a tax. Before the tax, 20 million cases of beer were sold every month at a price of $4 per case. After the tax, 13 million cases of beer are sold every month; consumers pay $7 per case, and producers receive $2 per case (after paying the tax). The amount of the tax on a case of beer is per case. Of this amount, the burden that falls on consumers is per case, and the burden that falls on producers is per case. 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. True Falsearrow_forwardSuppose that the local government of Columbus decides to institute a tax on soda producers. Before the tax, 30 million liters of soda were sold every month at a price of $9 per liter. After the tax, 23 million liters of soda are sold every month; consumers pay $14 per liter, and producers receive $6 per liter (after paying the tax). The amount of the tax on a liter of soda is $ that falls on producers is $ per liter. True or False: The effect of the tax on the quantity sold would have been smaller if the tax had been levied on consumers. True per liter. Of this amount, the burden that falls on consumers is $ False per liter, and the burdenarrow_forwardSuppose that the government imposes a per-unit tax on cell phones. The tax is imposed on producers of cell phones and the amount of the tax is $50 per cell phone. The following graph shows the effect of the tax. Use the graph to answer the following questions. a) How much of the tax per cell phone is paid by producers? How much of the tax per cell phone is paid by consumers? b) How much tax revenue (in total) does the government collect from the tax imposed on cell phones? c) What is the amount of the deadweight loss due to the presence of the tax on cell phones?arrow_forward
- 9. 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_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_forwardTyped plzzz And Asap Thanksarrow_forward
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