EBK PRINCIPLES OF MICROECONOMICS (SECON
2nd Edition
ISBN: 9780393616149
Author: Mateer
Publisher: W.W.NORTON+CO. (CC)
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Question
Chapter 5, Problem 2SP
(a)
To determine
Determine the
(b)
To determine
Determine the equilibrium quantity demanded and quantity supplied after the tax implementation.
(c)
To determine
Determine the amount of tax revenue from the tax.
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Students have asked these similar questions
The government is considering imposing an excise tax on the following set of items. If the government wants to minimize the deadweight loss (DWL) of taxation, which of the following items are good candidates for an excise tax
Choose one or more:
A. Tangerines
B. Gasoline
C. Salt
D. Ford trucks
Suppose a local government votes to impose an excise
tax of $1.00 per bottle on the sales of bottled
water. (Assume that all bottles are identical and residents
cannot shop elsewhere.) Before the tax the equilibrium
price and quantity are $1.20 and 1900 bottles per day.
After the tax is imposed, market equilibrium adjusts to a
price of $1.80 and quantity of 1400 bottles per day.
a. Draw the supply and demand diagram before and after
the excise tax is imposed.
1.) Using the line drawing tool, plot the original and new
supply curves and label the lines properly.
2.) Using the point drawing tool, indicate the original and
new equilibrium points and label these points properly.
Carefully follow the instructions above, and only draw the
required objects.
CH
Price ($ per bottle)
3.00-
2.80-
2.60-
2.40-
2.20-
2.00-
1.80-
1.60-
1.40-
1.20-
1.00-
0.80-
0.60-
0.40-
0.20-
0.00
0
1000
2000
Quantity (bottles per day)
If the government wants to raise tax revenue, which of the following items are good candidates for an excise tax?
Choose one or more: A. toilet paper B. automobile tires C. cigarettes D. sweet potatoes
Chapter 5 Solutions
EBK PRINCIPLES OF MICROECONOMICS (SECON
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Similar questions
- In a market where the supply curve is perfectly inelastic how does an excise tax affect the price paid by consumers and the quantity bought and sold?arrow_forwardSuppose a local government votes to impose an excise tax of $0.90 per bottle on the sales of bottled water. (Assume that all bottles are identical and residents cannot shop elsewhere.) Before the tax the equilibrium price and quantity are $1.20 and 2000 bottles per day. After the tax is imposed, market equilibrium adjusts to a price of $1.70 and quantity of 1300 bottles per day. a. Draw the supply and demand diagram before and after the excise tax is imposed. 1.) Using the line drawing tool, plot the original and new supply curves and label the lines properly. 2.) Using the point drawing tool, indicate the original and new equilibrium points and label these points properly. Carefully follow the instructions above, and only draw the required objects. Price ($ per bottle) 3.00 2.80- 2.60- 2.40- 2.20- 2.00- 1.80- 1.60- 1.40- 1.20- 1.00- 0.80- 0.60- 0.40- 0.20- 0.00+ 0 1000 2000 Quantity (bottles per day) 10 3000arrow_forwardHow does a tax on a good affect the price paid by buyers, price receive by sellers, and the quantity sold?arrow_forward
- Can you explain what happens when a tax is imposed on the buyer of a product and also what would happen if a tax is imposed on the seller? arrow_forwardQ. Assume that the demand for whiskey is Qd=9-0.5P and the supply of whiskey is Qs=P. a. Calculate the equilibrium price and quantity and show them on a supply and demand diagram. b. Suppose the government wants to discourage whiskey consumption and so levies a $2 tax for each unit of whiskey sold. Draw this on the diagram and calculate the new equilibrium price and quantity. How much revenue will this tax generate for the government?arrow_forwardSuppose 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 produers? b.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 and government revenues? d. Is there and inefficiency, and if so, can you define it and label it on the graph? e. If the producer has an inelastic supply curve, which market participant has the bigger tax brden? Explain.arrow_forward
- 1. What is the equilibrium price and quantity? 2. Suppose the government imposes a tax of $1.00 on each water bottle. Complete the column showing quantity supplied after the tax. (Hint: at a price of $8.00 the quantity supplied was 36000. With the tax, this quantity supplied will be supplied only at a price of $9.00, so the Quantity supplied with a tax at 9.00 is 36000) You continue, so at $8.50, the producer only gets 7.50. so is only willing to offer 32000 units. Qd Price 000s) $9.00 20 8.50 8.00 7.50 7.00 6.50 6.00 24 28 32 36 40 44 Qs (000s) 44 40 38 32 28 24 20 Quantity supplied after tax Qs(t) (000s) 36 32 Price 28 24 3. On your graph, plot the new supply curve after the imposition of the tax (in a different colour, to differentiate the supply curve). 4. What will be the new equilibrium price and quantity? 5. How much of the tax is passed onto the consumers in the form of price increase, and how much is paid by the producers? Indicate the producer and consumer burden on your…arrow_forwardThe following graph shows the daily market for wine. Suppose the government institutes a tax of $23.20 per bottle. This places a wedge between the price buyers pay and the price sellers receive. Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax. Using the data you entered in the previous table, calculate the tax burden that falls on buyers and on sellers, respectively, and calculate the price elasticity of demand and supply over the relevant ranges using the midpoint method. Enter your results in the following table. The burden of the tax falls more heavily on the ___ elastic side of the market.arrow_forwardThe following graph shows the market for the long-distance bus rides. In the absence of taxes, the equilibrium price of a ride is $5 and the equilibrium quantity is 10 million rides. Suppose that regulator levies an excise tax on bus service providers. The amount of excise tax equals $2 per ride. Calculate the tax revenue. $12 million $8 million $16 million $9 millionarrow_forward
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