Macroeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506756
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 4, Problem 11CQ
To determine
Explain the dead weight loss and excess burden
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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?
if deadweight loss is $24,000 under a tax of $4 per unit, what is deadweight loss under a tax of $2 per unit?
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Macroeconomics: 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 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 taxarrow_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_forward
- What happens to the deadweight loss and taxrevenue when a tax is increased?arrow_forwardExplain 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_forward
- Suppose 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_forwardiven 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_forwardWhat is the tax incidence of an excise tax when demand is highly inelastic and highly elastic?arrow_forward
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