Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Question
Chapter 5, Problem 5.3.10PA
To determine
The impact of tax of gasoline on the supply of gasoline.
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The government is considering levying a tax of $100 per unit on suppliers of either leather jackets or smartphones. The supply curve for each of these
two goods is identical, as you can see on each of the following graphs. The demand for leather jackets is shown by D (on the first graph), and the
demand for smartphones is shown by Ds (on the second graph)
Suppose the government taxes leather jackets. The following graph shows the annual supply and demand for this good. It also shows the supply curve (
S
Tax) shifted up by the amount of the proposed tax ($100 per jacket).
On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for leather jackets. Then use the
black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax.
?
Leather Jackets Market
240
Supply
220
200
S+Tax
Tax Revenue
180
160
Deadweight Loss
140
120
100
DL
40
20
0
0
50 100
150 200 250 300 350 400 450 500 550 600
QUANTITY…
The government is considering levying a tax of $120 per unit on suppliers of either leather jackets or smartphones. The supply curve for each of these
two goods is identical, as you can see on each of the following graphs. The demand for leather jackets is shown by D, (on the first graph), and the
demand for smartphones is shown by Ds (on the second graph).
Suppose the government taxes leather jackets. The following graph shows the annual supply and demand for this good. It also shows the supply curve (
S+Tax) shifted up by the amount of the proposed tax ($120 per jacket).
On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for leather jackets. Then use the
black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax.
Ⓡ
Leather Jackets Market
240
S+Tax
Tax Revenue
200
180
160
Deadweight Loss
D₁
Instead, suppose the government taxes smartphones. The following graph shows the…
Suppose the government imposes an excise tax on mountain bikes. The black line on the following graph shows the tax wedge created by a tax of $40
per bike.
First, use the tan quadrilateral (dash symbols) to shade the area representing tax revenue. Next, use the green point (triangle symbol) to shade the
area representing total consumer surplus after the tax. Then, use the purple point (diamond symbol) to shade the area representing total producer
surplus after the tax, Finally, use the black point (plus symbol) to shade the area representing deadweight loss.
After Tax
200
100
160
Tax Revenue
Demand
140
120
Consumer Surplus
100
Tax Wedge
Supply
Producer Surplus
40
Deadweight Loss
20
60
100
150 200 210 300
0 400
40 s00
QUANTITY (Ues)
( ad a soe
Chapter 5 Solutions
Economics (7th Edition) (What's New in Economics)
Ch. 5 - Prob. 5.1.1RQCh. 5 - Prob. 5.1.2RQCh. 5 - Prob. 5.1.3RQCh. 5 - Prob. 5.1.4RQCh. 5 - Prob. 5.1.5RQCh. 5 - Prob. 5.1.6PACh. 5 - Prob. 5.1.7PACh. 5 - Prob. 5.1.8PACh. 5 - Prob. 5.1.9PACh. 5 - In a study at a large state university, students...
Ch. 5 - Prob. 5.1.11PACh. 5 - Prob. 5.1.12PACh. 5 - Prob. 5.1.13PACh. 5 - Prob. 5.2.1RQCh. 5 - Prob. 5.2.2RQCh. 5 - Prob. 5.2.3RQCh. 5 - Prob. 5.2.4PACh. 5 - Prob. 5.2.5PACh. 5 - Prob. 5.2.6PACh. 5 - Prob. 5.2.7PACh. 5 - Prob. 5.2.8PACh. 5 - Prob. 5.2.9PACh. 5 - Prob. 5.2.10PACh. 5 - Prob. 5.2.11PACh. 5 - Prob. 5.3.1RQCh. 5 - Prob. 5.3.2RQCh. 5 - Prob. 5.3.3RQCh. 5 - Prob. 5.3.4PACh. 5 - Prob. 5.3.5PACh. 5 - Prob. 5.3.6PACh. 5 - Prob. 5.3.7PACh. 5 - Prob. 5.3.8PACh. 5 - Prob. 5.3.9PACh. 5 - Prob. 5.3.10PACh. 5 - Prob. 5.3.11PACh. 5 - Prob. 5.3.12PACh. 5 - Prob. 5.3.13PACh. 5 - Prob. 5.3.14PACh. 5 - Prob. 5.3.15PACh. 5 - Prob. 5.3.16PACh. 5 - Prob. 5.4.1RQCh. 5 - Prob. 5.4.2RQCh. 5 - Prob. 5.4.3RQCh. 5 - Prob. 5.4.4PACh. 5 - Prob. 5.4.5PACh. 5 - Prob. 5.4.6PACh. 5 - Prob. 5.4.7PACh. 5 - Prob. 5.4.8PACh. 5 - Prob. 5.4.9PACh. 5 - Prob. 5.4.10PACh. 5 - Prob. 5.4.11PACh. 5 - Prob. 5.4.12PACh. 5 - Prob. 5.1CTECh. 5 - Prob. 5.2CTE
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- Use the following graph to answer the question: how much is producer surplus? What is the total value to consumers of consuming the first ten units of this good?arrow_forwardThe accompanying graph depicts a hypothetical market for salt. Suppose that an excise or commodity tax is levied on consumers in an attempt to curb blood pressure problems. Show the effect of the tax by shifting the appropriate curve(s). Macmillan Learning Who has the larger tax burden? Consumers (buyers) Producers (suppliers) The tax burdens are equal Why is the tax burden as you described in in the question above? Consumers are the ones paying the tax. Demand is less elastic than supply. Both supply and demand are perfectly elastic. Supply is less elastic than demand. Demand is more elastic than supply. Price (S/kilogram) 9 3 Market for Salt D 4 5 Quantity (in kilograms). S 10arrow_forwardNote: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. PRICE (Dollars per pack) 10 9 8 7 2 1 0 Supply Demand 0 10 20 30 40 50 60 70 80 90 100 QUANTITY (Packs) Suppose the government imposes a $2-per-pack tax on suppliers. At this tax amount, the equilibrium quantity of cigarettes is Graph Input Tool Market for Cigarettes Quantity (Packs) Demand Price (Dollars per pack) Tax (Dollars per pack) 40 6.00 2.00 Supply Price (Dollars per pack) packs, and the government collects $ ? 4.00 in tax revenue.arrow_forward
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