Pearson eText Microeconomics -- Access Card
7th Edition
ISBN: 9780136850045
Author: Hubbard, Glenn, O'Brien, Anthony
Publisher: PEARSON
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Chapter 18, Problem 18.1.10PA
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Philadelphia and several other cities have imposed an excise tax on sugary drinks (it’s aimed primarily at sodas such as Coca-Cola and Pepsi-Cola, but would apply to all drinks with high sugar content). Philadelphia’s tax significantly increases the price of sodas and other sugary beverages. While other cities have cited the health benefits of cutting back on sugar consumption as the reason for an excise tax on sugary drinks, Philadelphia’s mayor said that his city would impose the tax to raise revenue for the city government to pay for pre-kindergarten and other popular services.
Which is an excise tax on sugary drinks more likely to accomplish: a large reduction in the consumption of sugary drinks, or a large boost in revenue for local government? Justify your answer, being sure to identify the concept that your justification rests on.
The government has introduced an excise duty of 10 percent on mealie meal. This essentially means the price of mealie meal, an essential item in most households, has increased by 10 percent. As the chief economist responsible for managing a social protection programme, you have been asked to make a proposal on how you can minimise the adverse effect of the excise duty on low income households. Using your knowledge of compensating or equivalent variation, show how you would ensure that these households are protected from such a measure. Would Lump sum taxes be better than unit (ad valorem or percentage) taxes in this context?
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…
Chapter 18 Solutions
Pearson eText Microeconomics -- Access Card
Ch. 18 - Prob. 18.1.1RQCh. 18 - Prob. 18.1.2RQCh. 18 - Prob. 18.1.3RQCh. 18 - Prob. 18.1.4RQCh. 18 - Prob. 18.1.5PACh. 18 - Prob. 18.1.6PACh. 18 - Prob. 18.1.7PACh. 18 - Prob. 18.1.8PACh. 18 - Prob. 18.1.9PACh. 18 - Prob. 18.1.10PA
Ch. 18 - Prob. 18.1.11PACh. 18 - Prob. 18.2.1RQCh. 18 - Prob. 18.2.2RQCh. 18 - Prob. 18.2.3RQCh. 18 - Prob. 18.2.4RQCh. 18 - Prob. 18.2.5PACh. 18 - Prob. 18.2.6PACh. 18 - Prob. 18.2.7PACh. 18 - Prob. 18.2.8PACh. 18 - Prob. 18.2.9PACh. 18 - Prob. 18.2.10PACh. 18 - Prob. 18.2.11PACh. 18 - Prob. 18.2.12PACh. 18 - Prob. 18.2.13PACh. 18 - Prob. 18.3.1RQCh. 18 - Prob. 18.3.2RQCh. 18 - Prob. 18.3.3PACh. 18 - Prob. 18.3.4PACh. 18 - Prob. 18.3.5PACh. 18 - Prob. 18.3.6PACh. 18 - Prob. 18.3.7PACh. 18 - Prob. 18.3.8PACh. 18 - Prob. 18.3.9PACh. 18 - Prob. 18.3.10PACh. 18 - Prob. 18.3.11PACh. 18 - Prob. 18.4.1RQCh. 18 - Prob. 18.4.2RQCh. 18 - Prob. 18.4.3RQCh. 18 - Prob. 18.4.4RQCh. 18 - Prob. 18.4.5RQCh. 18 - Prob. 18.4.6PACh. 18 - Prob. 18.4.7PACh. 18 - Prob. 18.4.8PACh. 18 - Prob. 18.4.9PACh. 18 - Prob. 18.4.10PACh. 18 - Prob. 18.4.11PACh. 18 - Prob. 18.4.12PACh. 18 - Prob. 18.4.13PACh. 18 - Prob. 18.4.14PACh. 18 - Prob. 18.4.15PACh. 18 - Prob. 18.1CTE
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