Microeconomics (7th Edition)
7th Edition
ISBN: 9780134737508
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Question
Chapter 5, Problem 5.3.11PA
Sub part (a):
To determine
Negative externalities and
Sub part (b):
To determine
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Connect Problem 06-21
The equilibrium price of a pair of earbuds is $30 per unit. Assume now that a tax of $20 is placed on each pair of earbuds.
Given the graph below, answer the questions that follow.
Price per pair
60
50
40
30
20
10
Market for Bluetooth Earbuds
0
1
2
B
3
4
Quantity
E
5
6
D
7 8
a) Before the tax, what is the equilibrium price per pair of earbuds? $
b) According to the graph, after the tax, what is the price a buyer must pay for a pair of earbuds? $
c) According to the graph, after the tax, how much does the seller receive for a pair of earbuds? $
d) What happens to the quantity demanded after the tax? decrease
30
Read the following excerpt: 'In the UK, fuel duty is levied per unit of fuel purchased and is included in the price paid for petrol, diesel and other fuels used in vehicles or for heating. The rate depends on the type of fuel: the headline rate on standard petrol and diesel has been reduced from 57.95 pence to 52.95 pence per litre.' Suppose that, in order to reduce greenhouse gas emissions, the UK government is considering raising fuel duty on standard petrol and diesel. Suppose that the government intends to earmark the additional fuel tax revenue, not for subsidising less carbon-intensive energy production (e.g., wind energy) but for supporting higher education (e.g., reduction in university fees). Are there additional theoretical implications in terms of efficiency in resource allocation, due to the intended use of the revenue? Explain.
With the help of appropriate diagrams, explain how a tax can be used to reduce the consumption of a harmful product such as cigarettes.
Chapter 5 Solutions
Microeconomics (7th Edition)
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 - Prob. 5.1.10PA
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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