EBK ECONOMICS: PRINCIPLES AND POLICY
13th Edition
ISBN: 8220100605932
Author: Blinder
Publisher: Cengage Learning US
expand_more
expand_more
format_list_bulleted
Question
Chapter 17, Problem 3TY
(a)
To determine
The
(b)
To determine
The equilibrium price and equilibrium quantity after imposing tax.
(c)
To determine
Impact of imposing tax on producer and consumer.
(d)
To determine
Impact of tax imposed on producer and shift into consumers.
(e)
To determine
The excess burden of tax.
(f)
To determine
The impact of imposing tax on consumption and its outcome.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solutionStudents have asked these similar questions
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.
Refer to the figure entitled "Market for Cola". Suppose
DO denotes the original demand curve and D1 denotes
the demand curve after a per-unit tax is imposed on the
buyers. What is the change in equilibrium price due to the
tax?
Price (per six pack)
10
1
4
10
Market for Cola
D₂
20
30
40
Quantity (# of six packs)
Da
50
1) $1
2) $2
3) $3
4) $4
5) None of the above.
Please answer both questions 2e - parts 2 and 3
Chapter 17 Solutions
EBK ECONOMICS: PRINCIPLES AND POLICY
Knowledge Booster
Similar questions
- To answer Questions #1-3, refer to the following diagram, which shows the monthly cigarette market in Wake County, North Carolina and the demand for, and supply of, cigarettes before and after the imposition of a $5.00-dollar per unit excise tax. Exam 2, Figure1-The Wake County Market for Cigarettes Per Pack Price Supply with tax 20.00 Supply before tax 18.00 16.00 Demand 10.00 Quantity Per Year (Milions of Packs) Ceteris paribus, how much will the government collect in annual tax revenue from this tax? Select one: a. $5 million b. $10 million C. $15 million d. $20 millionarrow_forwardThe following graph represents the demand and supply for pinckneys (an imaginary product). The black point (plus symbol) indicates the pre-tax equilibrium. Suppose the government has Just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario. Demand Supply 16, 18 21.00 18.00 15.00 QUANTITY (Pinckneys) Complete the following table, given the information presented on the graph. Result Value Per-unit tax $6.00 Equilbrium quantity before tax Price producers recelve before tax $18.00 In the following table, indicate which areas on the previous graph correspond to each concept. Check all that apply. Concept D. Deadweight loss after the tax is imposed Consumer surplus after the tax is imposed Producer surplus before the tax Is imposed PRICE (Dotars per pinckney) 口□□arrow_forwardThe demand for gasoline is P= 4 – 0.002Q and the supply is P= 0.4 + 0.004Q, where Pis in dollars and Qis in gallons. Instructions: Round your answer to the nearest penny (2 decimal places). If a tax of $0.8/gallon is placed on petrol, what is the incidence of the tax? Tax incidence to the consumer: $ Tax incidence to the supplier: $ Instructions: Round your answers to the nearest whole number. What is the lost consumer surplus? $1 What is the lost producer surplus? 24arrow_forward
- The table shows the quantities of beer supplied and demanded (in millions of six packs) at different prices ($ per six pack) in an unregulated market with no tax. Suppose a tax of $5 per six pack is collected from sellers of beer. Assume that the demand curve and the supply curve are straight lines. Quantity supplied Quantity demanded Price $4 28 $8 24 24 $12 40 20 With the tax in effect: The equilibrium price of beer is $ per pack (enter a whole number, example: 10) The equilibrium quantity of beer is million packs (enter a whole number, example: 10) The buyers' share of the tax is $ A per pack (enter a whole number, example: 10) The sellers' share of the tax is $ per pack (enter a whole number. example: 10)arrow_forwardThe following graph represents the demand and supply for pinckneys (an imaginary product). The black point (plus symbol) indicates the pre-tax equilibrium. Suppose the government has just decided to impose a tax on this market; the grey points (star symbol) indicate the after-tax scenario. PRICE (Dollars per pinckney) 37.50- 30.00 22.50 Demand Result Per-unit A B D с E 2.5 Supply QUANTITY (Pinckneys) Complete the following table, given the information presented on the graph. Equilibrium quantity after tax Price producers receive before tax $ Value ?arrow_forward6.Suppose a $ 60 per unit tax on gasoline is place on the seller and assume that the demand curve for gasoline is perfectly inelastic and the supply curve is elastic. Assume that the equilibrium price on gasoline is $120 and the equilibrium quantity of gasoline before the tax is implemented is 200,000 units. Please answer the following questions below using a supply and demand graph and words. As a result of the $60 per unit tax being placed on the sellers, did the supply curve shift to the left or to the right? What happened to the equilibrium price and equilibrium quantity of gasoline after the $60 per unit tax was implemented? Who pays most or all of the burden of the $60 tax, the buyer or the seller, and WHY? Please calculate the tax revenue collected by the government. Please show your work and calculation. Did the government make the right decision in implementing the $60 per unit tax on the sellers? Why or why not? Explain.arrow_forward
- At the current market equilibrium, the price elasticity of demand for a certain good is much higher than the price elasticity of supply. If the government imposes a $2 specific tax on this good, who will bear more of the burden of the tax? Illustrate.arrow_forwardRefer to Example 2.10, which analyzes the effects of price controls on natural gas. Recall that the free-market wholesale price of natural gas (PG) is $6.40 per mcf (thousand cubic feet), the average price of crude oil (Po) is $50 per barrel, and production and consumption of gas (Q) are 23 Tcf (trillion cubic feet). Suppose the price elasticity of supply of natural gas is 0.20, the cross-price elasticity of supply of natural gas with respect to the price of oil is 0.12, the price elasticity of demand for natural gas is -0.60, and the cross-price elasticity of demand for natural gas with respect to the price of oil is 1.25. If so, then the linear supply curve for natural gas is OA. Q=1.346-1.638PG +0.055PO B. Q=12.056+0.368PG -0.495PO- O C. Q=16.296 +0.495P + 1.638Po O D. Q=10.562 +1.066PG-0.327Po O E. Q=15.648+0.719P+0.055Poarrow_forwardSuppose producers bear most of the burden of a specific tax of 20 cents on staplers. Which ONE statement best describes the supply and demand for staplers? Suppose sandals have an elastic own-price elasticity of demand. If price goes up by 2%, then what happens to quantity demanded?arrow_forward
- The demand and supply equations for a product are: Q* = 0.2 300 – 6P and Q' = -40 + 6P. Determine the market equilibrium and draw graphs. Suppose that the government decides to impose a flat tax of 10% on each unit sold. Show that the price that consumers pay would be the same if the government imposed a tax of Rs. 1.70 per unit sold. Draw graphs and explain. Also calculate the total revenue earned by sellers before and after the tax, the tax revenue raised by the government, changes in consumer and producers surplus and dead weight loss.arrow_forwardSuppose that the demand for tea in Boston is described by Quantity demanded = 20-p and the quantity supplied = 2p-4. What would be the price paid by consumers if there was a 6 dollar tax on tea?arrow_forwardThe figure below represents the market for Gasoline, where initially the equilibrium price was $5.60. The picture shows the effect of a $1.50 tax on gasoline. Using the information from the figure, what is the price elasticity of supply(Using the Midpoint method) when moving from equilibrium to the new supply after the tax?(round your answer to 2 decimal places)arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
- Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage LearningPrinciples of Macroeconomics (MindTap Course List)EconomicsISBN:9781285165912Author:N. Gregory MankiwPublisher:Cengage LearningPrinciples of Microeconomics (MindTap Course List)EconomicsISBN:9781305971493Author:N. Gregory MankiwPublisher:Cengage Learning
- Principles of Macroeconomics (MindTap Course List)EconomicsISBN:9781305971509Author:N. Gregory MankiwPublisher:Cengage LearningMicroeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:9781285165912
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Microeconomics (MindTap Course List)
Economics
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:9781305971509
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning