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 14CQ
To determine
Explain the policy makers seek to set the tax on an economic activity.
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Please answer these two questions using the information from above:
The government wants to increase production of this good. Would it make more sense to offer a subsidy or a tax?
Based on your previous answers, would the government plan to increase production be likely to be effective or ineffective? Explain your answer.
How a tax burden is divided between consumers and producers is called tax incidence. Consumers bear most of the tax burden when:
If tax incidence is not affected by whether the government makes buyers or sellers pay the tax then which factors determine the tax incidence?
Chapter 4 Solutions
Macroeconomics: Private and Public Choice (MindTap Course List)
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- If the government imposes a tax of 8% on luxury cars that the consumer must pay, why does the consumer not actually pay the full 8%? How is it determined how much the consumer will pay and how much the producer will pay? Is it possible for an 8% tax the government imposes on the consumer to actually have 1% paid by the consumer and 7% by the producer? Why or why not?arrow_forwardDo you think profit could be maintained if the tax burden were simply passed on to the consumers in the form of higher selling price? How will this affect sales? Explain.arrow_forwardFor which of the following goods, the burden of a sales tax is borne more by buyers than by sellers? Group of answer choices poultry iPhone high-end cars labor (i.e., the Social Security Tax)arrow_forward
- How does a Tax on Production affect a negatively sloped Demand curve or the Supply Curve? The supply curve shifts to the Left The supply curve shifts to the Right There is no shift, only movement along the Supply Curve The demand curve shifts to the leftarrow_forwardinstructure.com/courses/11047/quizzes/121411/take The following graph depicts a market where a tax has been imposed. Pe was the equilibrium price before the tax was imposed, and Qe was the equilibrium quantity. After the tax, Pc is the price that consumers pay, and Ps is the price that producers receive. Qr units are sold after the tax is imposed. NOTE: The areas B and C are rectangles that are divided by the supply curve ST. Include both sections of those rectangles when choosing your answers. nº P₁ " A A B M C Q₁ Which areas represent consumer surplus before the tax is imposed? C+G+E B-C Q₂arrow_forwardThe following graph represents the demand and supply for blinkies (an imaginary product). The black point (plus symbol) indicates the pre-tax equilibrium. Suppose the government has just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario. PRICE (Dollars per blinkie) 64.00 48.00 32.00 Demand A B D F 20 C E 40, 48 40 Supply QUANTITY (Blinkies) ?arrow_forward
- The government taxes both clothing and tobacco. For a similarly sized tax, would you expect the quantity demanded of clothing or tobacco to be more affected?arrow_forwardThe following graph depicts a market where a tax has been imposed. P, was the equilibrium price before the tax was imposed, and Qe was the equilibrium quantity. After the tax, Pc is the price that consumers pay, and Ps is the price that producers receive. QT units are sold after the tax is imposed. NOTE: The areas B and C are rectangles that are divided by the supply curve ST. Include both sections of those rectangles when choosing your answers. ST S. A P. G P. the deadweight loss created as a result of the tax the total tax revenue cellectod from thic tox E. P.arrow_forwardSuppose the government imposes a tax of 20% on automobile production for cars that use fossil fuels, and scientists estimate that the environmental cost of these automobiles is about 10%, please show in a demand and supply framework how this tax is going to increase or reduce social welfare?arrow_forward
- Explain why economists usually oppose controls on prices.arrow_forwardDoes a tax on buyers affect the demand curve?arrow_forward"We should impose a 20 percent luxury tax on expensive automobiles (those with a sales price of $75,000 or more) in order to collect more tax revenue from the wealthy." Will the burden of the proposed tax fall primarily on the wealthy? Why or why not?arrow_forward
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