ECONOMICS-W/MYECONLAB
7th Edition
ISBN: 9780134833125
Author: Hubbard
Publisher: PEARSON
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Question
Chapter 18, Problem 18.2.5PA
Sub part (a):
To determine
Why taxes result in a deadweight loss .
Sub part (b):
To determine
Why taxes result in a deadweight loss.
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Draw a supply and demand graph for cookies, showing the equilibrium price and quantity. On the same graph, assume that the government imposes a $5 tax on cookies. Show on the graph the following: what happens to the price paid by the buyers, what happens to the price received by the sellers, the size of the tax, what happens to the quantity sold, what the consumer surplus is after the tax, what the producer surplus is after the tax, what the government tax revenue is after the tax, and what the deadweight loss is after the tax Use letters to label the different areas on the graph where needed. You don’t need to show any shift of supply or demand
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On a graph, show the effect of a per unit tax on BUYERS of cigarettes. (This requires you to think about the shape of the demand curve for cigarettes. You can assume a sort of neutral supply curve. Indicate the change in price and quantity from the tax. The consumer and producer surplus after the tax, the tax incidence on buyers and sellers and the deadweight loss. Who pays more of this tax?
[Note: In the book they talk about the effect of cigarette taxes on OTHER states. That's not what I'm talking about here. Just tell me about the market on which the tax is imposed.]
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Fill in the following table with the quantity sold, the price buyers pay, and the price sellers receive before and after the tax.
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Chapter 18 Solutions
ECONOMICS-W/MYECONLAB
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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- Use the graph to answer the following question: Which letters on the graph represent consumer surplus before the tax? A) W, T, and V B) R, S, T, and W C) U and V D) R, S, and Uarrow_forwardThe City of Philadelphia is currently considering a 3 cent per ounce tax on sugary beverages. A member of the City Council happens to have majored in economics and suggests that the city also consider an equivalent lump-sum tax that generates the same revenue. (a) Which sort of tax would a consumer prefer, and why? Draw a graph comparing the two taxes to help illustrate your answer. (b) Which sort of tax would an economist prefer, and why? (c) Which sort of tax might a politician prefer, and why?arrow_forwardHow a tax burden is divided between consumers and producers is called tax incidence. Consumers bear most of the tax burden when:arrow_forward
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