Suppose the equation for the demand curve for some product X is P = 8 − 0.6Q and the supply curve is P = 2 + 0.4Q. What are the equilibrium price and quantity? Now suppose an excise tax is imposed on X such that the new supply equation is P = 4 + 0.4Q. How much tax revenue will this excise tax yield the government? Graph the curves, and label the area of the graph that represents the tax collection “TC” and the area that represents the efficiency loss of the tax “EL.” Briefly explain why area EL is the efficiency loss of the tax but TC is not.
Q: What is a budget surplus? Outline the benefits and use of a budget surplus in macroeconomic…
A: The government expenditure level and the amount of tax collection determine whether the government…
Q: The idea that an increase in a tax rate generates a reduction in the tax base that makes the net…
A: Imposition of tax on a good generates tax revenue for the government
Q: USe the accompanying graph to answer these questions. b. Suppose demand is D and supply is S^0. If…
A: b. Price floor is the maximum price which government has imposed above which goods are sold in the…
Q: Show that given a linear demand schedule and constant marginal cost, the excise tax will lead to a…
A: market is in equilibrium where demand and supply are equal . the process of getting equilibrium is…
Q: The following graph shows the aggregate demand curve. Shift the aggregate demand curve on the graph…
A: Aggregate demand is the total demand for the goods and services in the economy, and is equal to the…
Q: If a 10 cent tax is imposed on a supply curve with the function Qs = P - 2, the function…
A: supply is defined as the quantity of goods that the producers decide to sell in the market at any…
Q: Find the equilibrium Price and output of the following function: 13P-Qs=27 Qd+4P-24=0 Suppose the…
A: In a market, tax is one of the factors that will affect the market equilibrium and generally lead to…
Q: Suppose that the U.S. government decides to charge wine producers a tax. Before the tax, 20 million…
A: Tax burden=Amount consumers pay after tax-Amount producers receive after tax paymentTax burden on…
Q: You have the following information from the market Demand function: QD=280−5P Supply function:…
A: Since you have asked a question with multiple sub-parts, we will solve the first three sub-parts for…
Q: Suppose the equation for the demand curve for some product X is P = 8 - .6Q and the supply curve is…
A: Given information: Demand equation P = 8 - 0.6Q Supply equation P= 2 + 0.4Q To find out the…
Q: Government-imposed taxes cause reductions in the activity that is being taxed, which has important…
A: When a government intervenes in a free market, it generally leads to market inefficiency because it…
Q: Now we look at the role taxes play in determining equilibrium income. Suppose we have an economy of…
A: In a closed economy, the equilibrium level of income is attained at Y =Aggregate demand where AD=…
Q: The Laffer Curve illustrates that government can collect the same amount of tax revenue by choosing…
A: 1.Laffer curve is an inverted U shape like a curve. It states the relationship between tax rates and…
Q: Suppose that the government has decided to place a $2 per litre tax on soft drinks. In this market,…
A: The economics as a study is based upon the idea and decision making where the resources are to be…
Q: Do you think profit could be maintained if the tax burden were simply passed on to the consumers in…
A: The division of a tax burden across stakeholders, such as buyers and sellers, and producers and…
Q: 1. The monthly demand function is p, =31,000,000 --q° and the supply function 3 before taxation is…
A: Inverse Demand: Pd = 31000000 - 1/3q2 Inverse Supply: Ps = 1500000+4500q
Q: According to studeis undertaken by the U.S. Department of Agriculture, the price elasticity of…
A: Because of increase in price of cigarettes,consumption of cigarettes would decrease. Because price…
Q: Imagine that you work for the central bureaucracy and you need to raise revenue. You want to use a…
A: Price elasticity measures the responsiveness in quantity demanded/supplied of a commodity to a…
Q: conomists in Champaign have been studying the local market for pizza. The market is described in the…
A: With tax imposed in the free market, the equilibrium quantity will fall and the market price will…
Q: Suppose that a City government introduces a $ 0.50 excise (commodity)tax on consumers of bottles of…
A: Meaning of Excise Tax Duty: The term excise tax refers to an indirect tax situation that is being…
Q: What is the tax incidence of an excise tax when demand is highly inelastic? Highly elastic? What…
A: Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…
Q: The graph shows the market for smartphone chargers. Draw a point to show the price of a smartphone…
A: Tax is a measure of cash/money that you need to pay to the public authority so it can pay for public…
Q: What is the Laffer curve. Graphically show how to increase the tax revenue.
A: The economies around the world tend to operate with the motive of increasing their growth, and…
Q: In 2018, the Government of the Federated Republic of Coconut Islands had a budget surplus of $20…
A: Budget = Tax revenue - Government expenditure +20 = tax revenue -324 Tax revenue = 344
Q: Part 1: Suppose that the government imposes a $4 per pizza tax on the sellers of pepperoni pizzas.…
A: Since you have posted a question with multiple sub-parts, we will solve first three subparts for…
Q: Suppose the government imposes a $20-per-bottle tax on suppliers. At this tax amount, the…
A: Equilibrium price and quantity is determined by the market demand and market supply. Laffer curve…
Q: Consider the supply and demand functions graphed below. Demand Supply 20 50 80 100 Download the…
A: Tax imposed on either side reduces the quality sold in the market.
Q: The figure below shows a market of good C. Suppose that the government levied a tax on C. If the…
A: The markets are the place where the buyers and the sellers of various goods and services tend to…
Q: Consider the supply and demand functions graphed below. 10 5 2 17 Р Demand 20 50 80 Supply 100…
A: Equilibrium occurs at the intersection of demand and supply curves, where quantity demanded equals…
Q: 4. The Laffer curve Government-imposed taxes cause reductions in the activity that is being taxed,…
A: In economics, the Laffer curve outlines a hypothetical connection between paces of taxation and the…
Q: Q)Economics If the tax elasticity of supply is 0.16, by how much will the quantity supplied increase…
A: The tax elasticity of supply (T.Es) demonstrates the effect of a change in marginal tax rate on the…
Q: C = 450 + 0.4Y I = 350 G = 150 X = 70 Z = 35 + 0.1Y T = 0.15Y Yf = 1550 Q.2.5 Calculate…
A: equilibrium in Keynesian model where the aggregate demand equal the aggregate income
Q: Which of the following, if true, would most effectively undermine the argument that raising…
A: A crucial structure block of monetary hypothesis is the way that expanding (or diminishing) the cost…
Q: In the market for a good, the aggregate demand and supply are summarized by the following…
A: Given Aggregate demand Qd (p) = 20−p and supply Qs (p) = 2p−4 government charges a per-unit tax…
Q: Use the circular flflow diagram to show how each of the following government actions simultaneously…
A: Hi! Thank you for the question, As per the honor code, we are allowed to answer three sub-parts at a…
Q: Q.1. A budget deficit occurs when: (a) there is an increase in taxation. (b) government spends less…
A: Since you have asked multiple question, we will solve the first question for you. If you want any…
Q: Suppose that a tax is placed on a particular good. If the consumers pay a higher share of the tax,…
A: Elasticity measures the responsiveness of quantity to changes in price level
Q: se a circular flow diagram to show how the allocation of resources and the distribution of income…
A: 1) A 2-percentage point reduction of the corporate income tax: Generate money from collecting income…
Q: 1.Suppose that the government puts a tax of 15 cents a gallon on gasoline and then…
A: Since you have asked multiple-parts questions, we will solve only the first three questions for you.…
Q: 1. Assume that the demand for cigarettes is Qd=1600-30P and the supply of cigarettes is Qs=1400+70P.…
A: A tax is a financial surcharge imposed by the government on the production or consumption of a good…
Q: The Laffer curve illustrates the concept that a. an increase in marginal tax rates will always…
A: The Laffer Curve theory was developed by the economist Arthur Laffer and it shows the relationship…
Q: What effect an increase of government spending will have on the output equilibrium in the goods…
A: The autonomous spending is a part of total spending which is made by the government irrespective of…
Q: Shift the aggregate demand curve on the graph to show the impact of a tax hike. 130 120 Aggregate…
A:
Q: Refer to the photo below. What is the equilibrium level of income for this economy if Y = C + I + G…
A: The aggregate expenditure would be equal to the output in the Keynesian model. The Keynesian model…
Q: Suppose the following demand and supply function of a commodity. 15 Qd =…
A:
Q: In the diagram to the right, illustrating a per-unit tax equal to P, minus Pa, tax revenue is…
A: Tax revenue = D and F Excess burden = E and G
Suppose the equation for the demand curve for some product X is P = 8 − 0.6Q and the supply curve is P = 2 + 0.4Q. What are the
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 17 images
- Suppose the equation for the demand curve for some product X is P = 8 - .6Q and the supply curve is P = 2 + .4Q. What are the equilibrium price and quantity? Now suppose an excise tax is imposed on X such that the new supply equation is P = 4 +.4Q. How much tax revenue will this excise tax yield the government? Graph the curves, and label the area of the graph that represents the tax collection “TC” and the area that represents the effificiency loss of the tax “EL.” Briefly explain why area EL is the effificiency loss of the tax but TC is not.President Biden has proposed a $2.2 trillion Infrastructure package to repair roads and bridges. The exact source of the funds is unclear at the time of construction of this exam, but some policy analysts think that at least one part of the funding will be an increase in the federal excise tax on gasoline. Suppose the size of this increase in excise tax is written as t. Using a graph and equilibrium, analyze and explain the impact of this t dollars per gallon increase in excise tax on gasoline. Which of the curve(s), if any, would shift, and why? Graphically, show the new equilibrium price and quantity (labeling it P1 and Q1). At the new equilibrium, please determine how much of the tax increase was borne by gasoline consumers and how much was absorbed by gasoline sellers? Indicate the incidence of taxation for both consumers and sellers on the graph and explain. What will determine whether consumers or sellers will bear a higher relative burden of taxation? Please explain in detail.Government-imposed taxes cause reductions in the activity that is being taxed, which has important implications for revenue collections. To understand the effect of such a tax, consider the monthly market for gin, which is shown on the following graph. Use the graph input tool to help you answer the following questions. You will not be graded on any changes you make to this graph. Note: Once you enter a value in a white field, the graph and any corresponding amounts in each grey field will change accordingly. Suppose the government imposes a $20-per-bottle tax on suppliers. At this tax amount, the equilibrium quantity of gin is____ bottles, and the government collects_____ in tax revenue.
- 1.Suppose that the government puts a tax of 15 cents a gallon on gasoline and then later decides to put a subsidy on gasoline at a rate of 7 cents a gallon. What net tax is this combination equivalent to? 2. Suppose that a budget equation is given by p1x1 + p2x2 = m. The government decides to impose a lump-sum tax of u, a quantity tax on good 1 of t, and a quantity subsidy on good 2 of s. What is the formula for the new budget line? 3.If the income of the consumer increases and one of the prices decreases at the same time, will the consumer necessarily be at least as well-off? 4.If we observe a consumer choosing (x1, x2) when (y1, y2) is available one time, are we justified in concluding that (x1, x2) > (y1, y2)? 5.Consider a group of people A, B, C and the relation “at least as tall as,” as in “A is at least as tall as B.” Is this relation transitive? Is it complete? 6.Take the same group of people and consider the relation “strictly taller than.” Is this…In 2018, the Government of the Federated Republic of Coconut Islands had a budget surplus of $20 million dollars. Suppose that in the same year, the total amount of government expenditures was $324 millions. What was the government's tax revenues in that year?Suppose that a City government introduces a $ 0.50 excise (commodity)tax on consumers of bottles of soda to improve the health of its citizens.manipulate the accompanying graph to demonstrate the impact of the tax on the market for soda. What would be the new equilibrium quantity if instead of taxing consumers,the City of taxed producers?
- 1. Taxes and Efficiency Suppose the government is thinking about levying a per-unit tax of $30 on firms supplying either sweatpants or glasses. The supply curves for both of the two goods are identical, as given by the following graphs. The demand for sweatpants is given by DSDS (on the first graph), and the demand for glasses is given by DGDG (on the second graph). Suppose the government decides to tax sweatpants. The following graph plots the yearly demand and supply for this good. It also plots another supply curve (S+TaxS+Tax) shifted upward by the proposed tax amount ($30 per pair). On the following graph, use the green rectangle (triangle symbols) to shade the area that represents tax revenue for sweatpants. Then use the black triangle (plus symbols) to shade the area that represents the deadweight loss associated with the tax. Sweatpants MarketTax RevenueDeadweight Loss050100150200250300350400450500550600605550454035302520151050PRICE (Dollars per pair)QUANTITY…1) Suppose the figure represents the Laffer Curve for income taxes on high-income earners. If the tax rate on high-income earners is 55% a) marginal tax revenue will increase if tax rates are increased. b) marginal tax revenue is negative. c) the tax rate is optimal. d) marginal tax revenue is positive. 2) Suppose the figure represents the Laffer Curve for income taxes on high-income earners. Which of the following best explains the shape of the Laffer Curve? a) As tax rates rise, individuals work the same amount but conceal more income from tax authorities. b) As tax rates rise, individuals work the same amount and the same amount of income is available to tax. c) As tax rates rise, individuals work more and more income is available to tax. d) As tax rates rise, individuals work less and less income is available to taxImagine that you work for the central bureaucracy and you need to raise revenue. You want to use a per-unit tax on some good. There are two possible goods. The current equilibrium price and quantity are the same for both goods. However, for good A, both the supply and demand are more elastic than for good B. The tax will be $1/unit regardless of which good you choose to tax. Which good will give you more revenue? Which one will be more efficient? Show this with two graphs. (You do NOT need to show the incidence on buyers and sellers to answer this question. These graphs should be pretty simple.....)
- The government is considering levying a tax of $80 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 DLDL (on the first graph), and the demand for smartphones is shown by DSDS (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+TaxS+Tax) shifted up by the amount of the proposed tax ($80 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. Instead, suppose the government taxes smartphones. The following graph shows the annual supply and demand for this good, as well as the supply curve…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 DLDL (on the first graph), and the demand for smartphones is shown by DSDS (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+TaxS+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. Instead, suppose the government taxes smartphones. The following graph shows the annual supply and demand for this good, as well as the supply curve…Which of the following statements correctly describes the relationship between the size of the deadweight loss and the amount of tax revenue as the size of a tax increases from a small tax to a medium tax and finally to a large tax? Both the size of the deadweight loss and tax revenue increase. The size of the deadweight loss increases, but the tax revenue decreases. The size of the deadweight loss increases, but the tax revenue first increases, then decreases. Both the size of the deadweight loss and tax revenue decrease.