EBK PRINCIPLES OF MICROECONOMICS
12th Edition
ISBN: 9780134069180
Author: Oster
Publisher: YUZU
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Question
Chapter 19, Problem 2.2P
(a)
To determine
Identify the role of the payroll tax on labor supply.
(b)
To determine
Identify the role of corporate income tax on the
(c)
To determine
Identify the role of the payroll tax on labor supply.
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Suppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.8 and 0.7 respectively. Suppose the government imposes a per-unit tax of $45
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Chapter 19 Solutions
EBK PRINCIPLES OF MICROECONOMICS
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- Suppose legislation is passed stating that a per unit tax of $.50 per gallon of gasoline must be paid by energy suppliers. Assuming demand for gasoline is more inelastic than supply of gasoline. Will the tax discourage driving? a. Not at all as the tax burden will be entirely on firms as it is required by law to pay it. b. Driving may decline but possibly only slightly as demand is inelastic. c. Driving will decline considerably regardless of how demand is inelastic. d. Driving may decline by a significant amount particularly if demand is perfectly inelastic.arrow_forwardSuppose legislation is passed stating that a per unit tax of $.50 per gallon of gasoline must be paid by energy suppliers. Assuming demand for gasoline is more inelastic than supply of gasoline, then the tax revenue economically generated by this tax comes from? a. The tax payment by the energy suppliers as they are ordered by law to pay the tax. b. The price disruption caused by the tax and the revenue will economically come from suppliers more so than consumers. c. The price disruption caused by the tax and the revenue will economically come from consumers more so than firms. d. The price disruption caused by the tax and the revenue will economically come from consumers and firms in equal amounts.arrow_forwardConsider the market for junk food. Illustrate and explain the effects on price, quantity and the incidence of the tax due to the imposition of a tax if demand is (a) relatively elastic and (b) relatively inelastic.arrow_forward
- The market for soft drinks is perfectly competitive. Assume that the supply of soft drinks is point elastic and upward sloping. The government imposes a consumer tax on soft drinks. If point elasticity of demand is inelastic, is the deadweight loss generated by the tax higher or lower relative to where the point elasticity of demand is elastic? Explain why.arrow_forwardDo you think profit could be maintained if the tax burden were simply passed on to the consumers in the form of higher selling price? How will this affect sales? Explain.arrow_forwardHow do the relative elasticities of supply and demand determine tax or subsidy incidence?arrow_forward
- Determine burden of the tax (or the incidence of the tax that falls on consumers and producer). Who gets most of the burden of the tax. Answer on the basis of elasticity. How much tax revenue is expected by the government to be raised for this good per year?arrow_forwardConsider the market for BP gasoline. If the market has a very elastic supply and a very inelastic demand, how would the burden of a tax on BP gasoline be shared between producers and consumers? Draw a graph to support your answer.arrow_forwardIf the burden of a tax on sugary drinks is borne mostly by consumers, it must be the case that: a) The demand for sugary drinks is much less elastic than their supply. b) Both the demand for, and the supply of, sugary drinks is inelastic. c) Both the demand for, and the supply of, sugary drinks is elastic. d) The demand for sugary drinks is much more elastic than their supply.arrow_forward
- Suppose the market for cigarette is competitive. An economist estimates the price elasticity of demand and supply for cigarette are -0.6 and 0.8 respectively. a. Suppose the government imposes a per-unit tax on the cigarette sellers. Who, buyers or sellers, would share a heavier tax burden? Explain your answers without calculation. b. Suppose the government imposes a per-unit tax of $40 on the cigarette sellers. By how much would buyers and sellers of cigarettes share the tax burden respectively? Show your calculation. c. Suppose many small sellers, such as newsstands, complain the heavy tax burden borne by them. Would it be better to these small sellers if the government decides to impose a $20 per-unit tax on both the buyers and the sellers of cigarette? Explain.arrow_forwardIf the purpose of a tax is to decrease the amount of a harmful activity, then the taxwould be most effective when the supply is ________ and the demand is ________A) elastic; elasticB) inelastic; inelasticC) elastic; inelasticD) inelastic; elasticarrow_forwardSuppose legislation is passed stating that a per unit tax of $.50 per gallon of gasoline must be paid by energy suppliers. Assuming demand for gasoline is more inelastic than supply of gasoline, then the economic burden of this tax? a. Will be equally experienced by energy suppliers and consumers. b. Gasoline prices will be disrupted by the tax and this disruption will harm consumers more than energy suppliers. c. Gasoline prices will be disrupted by the tax but this disruption will harm only energy suppliers since they are ordered by law to pay the tax. d. Gasoline prices will be disrupted by the tax and this disruption will harm suppliers more so than consumers.arrow_forward
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