Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 4, Problem 11CQ
What is the nature of the
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Due to imposing a sugar tax, who would likely suffer a greater share of the deadweight loss – the consumer or producer? Explain.
Consider the market below where the government has imposed a $12 excise tax on this
product.
P
$33
$24
$18
$15
$12
$3
A
B
D
F
QE₁
18
с
E
Siafter tax
So before tax
<
Q
QE₂
QE。
30
42
What area on the graph represents the total amount of DEADWEIGHT LOSS that results from
the imposition of the tax?
The annual demand for imported oranges is given by the following equation:QD = 600,000 − 30,000Pwhere P is the price per kilogram and QD is quantity of kilograms demanded per year.The supply of imported oranges is given by the equation:QS = 20,000P
Calculate the following: i. the excess burden of the tax
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Economics: Private and Public Choice (MindTap Course List)
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- Based on your knowledge of the price elasticity of demand, do you think the deadweight loss of a soda/junk-food tax would be relatively large or relatively small?arrow_forwardThe market demand for super-sticky glue is Q = 340 - 6P and the market supply is Q= 340 + 2P. a. Calculate the deadweight loss of a tax of GHS4 levied on producers of super-sticky glue. per unit b. How does deadweight ioss change if the tax is levied on consumers of super-sticky glue?arrow_forwardWhat happens to the deadweight loss and taxrevenue when a tax is increased?arrow_forward
- Explain why the imposition of the price ceiling does not result in a deadweight loss.arrow_forwardDiscuss how elasticity of demand can impact the size of the deadweight loss in a market subject to taxationarrow_forwardSuppose demand for good X is given by QD = 900- p/2 where p is the price and QD the quantity demanded. Supply is given by QS = p/4.Suppose 60 TL tax is imposed on each unit of X that is purchased.What is the burden of the tax? Explain the key factors that determine the incidence of the tax.arrow_forward
- iven the following information QD = 240-5P QS= P Where QD is the quantity demanded, Qs is the quantity supplied and P is the price. Suppose the government decides to impose a tax of $12 per unit on sellers in this market. Determine the deadweight loss of the taxarrow_forwardSuppose there is only one movie theatre in a town and the equilibrium price and quantity for movie admissions is 7 TL and 940 visits per week. Now suppose the government imposes a tax of 3 TL per movie admission, and the new equilibrium price and quantity are 8.75 TL and 750 visits per week. What is the total burden of this tax?arrow_forwardWhat is the tax incidence of an excise tax when demand is highly inelastic and highly elastic?arrow_forward
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