Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 9, Problem 7Q
To determine
The meaning of Pigouvian taxes or subsidies and when will the government levy Pigouvian taxes or subsidies.
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What is the price that consumers pay after the subsidy is implemented?
e. What happens when government imposes a tax of 60 cents per gallon on buyers?
Discuss and provide two examples of how subsidies can be economically harmful.
Chapter 9 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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- If the government wants to use a Pigouvian tax to alleviate the problem of obesity contagion, what should it tax? What factors go into deciding the size of the tax?arrow_forwardCan 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_forwardWhat is pigovian tax. Explain in detail.arrow_forward
- why do comsumers pay the tax on goods if the elasticity of demand is less than the elasticty of supply?arrow_forwardIf 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_forwardHow a Pigovian tax affects consumers? Please support your explanation based on a figure.arrow_forward
- Suppose the government imposes a tax of $20 million per month on cable producers. If Comcast wants to maximize its profit, what price per subscription should it charge per month?arrow_forwardIdentify at least one positive externality from running a donut shop. Identify at least one negative externality from running a donut shop. Explain how these positive and negative externalities could impact the donut shop’s profits. (Hint: think subsidy for positive externality and tax for negative externality.) Draw two graphs that show the price of donuts before and after the positive and negative externality impacted the price of your donuts.arrow_forwardSuppose government impose a tax of 1 dollar per bottle on sellers of industrial detergent. Explain 3 dimensions in which you can explain the effect of this tax.arrow_forward
- Suppose the price elasticity of demand for smartphones is 0.5 (absolute value), while the price elasticity of supply is 1.9. If the government imposes a per-unit tax of $100 on the sellers of smartphones, how will the price and quantity transacted of smartphones change? Will the sellers or the buyers bear a larger tax burden? Will the market be able to achieve economic efficiency after the tax is imposed? Explain with a diagram.arrow_forwardThe demand for beer is more elastic than the demand for milk. Would a tax on beer or a tax on milk have a larger deadweight loss? Why?arrow_forwardThe United States government subsidizes many so-called green companies. For instance, it has given millions of dollars to solar panel companies. In the market for solar power, illustrate what the government subsidies mean.arrow_forward
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