Bundle: Essentials Of Economics, 8th + Mindtap Economics, 1 Term (6 Months) Printed Access Card
8th Edition
ISBN: 9781337378833
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 8, Problem 2QR
To determine
The
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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
Some economists believe that a sales tax, in general, is undesirable. Explain. Despite this, why do most countries still impose a tax on cigarette? Explain plausible arguments.
How does a tax on a good affect the price paid by buyers, price receive by sellers, and the quantity sold?
Question 37
Please refer to the description of a tax on a market, represented by the graphic
The imposition of the tax causes the quantity sold to change to ________ units.
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Bundle: Essentials Of Economics, 8th + Mindtap Economics, 1 Term (6 Months) Printed Access Card
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- The demand for beer is more elastic than the demand for milk. Would a tax on beer or a tax on milk have a larger deadweight loss? Why?arrow_forwardThe vertical distance between points A and B represents the tax in the market. 24 16 10 price $24 70 100 $16 $8 $10 S The price that seller receive after the tax is imposed is quantityarrow_forwardPrice $3.50 3 2.50 $0.25 $1.00 1,200 1,500 $0.50 Supply The figure above illustrates a market for gasoline with a $1 tax imposed on the buyers. What is the seller's tax incidence? Between $0.00 and $1.00 depending on elasticity of supply. Demand Demand + $1 tax Quantityarrow_forward
- The following graph shows the market for the long-distance bus rides. In the absence of taxes, the equilibrium price of a ride is $5 and the equilibrium quantity is 10 million rides. Suppose that regulator levies an excise tax on bus service providers. The amount of excise tax equals $2 per ride. Calculate the tax revenue. $12 million $8 million $16 million $9 millionarrow_forwardSuppose 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 on the cigarette sellers. By how much would buyers share the tax burden respectively? Show your calculation.arrow_forwardConsider the market for commercial fans. The following graph shows the demand and supply for commercial fans before the government imposes any taxes.arrow_forward
- Price Pa Pb ££ Pc Qt Q* Supply Demand Quantity The government imposes an excise tax on the market, what is the size of the tax? A) Pa-Pb B) Pa-Pc C) Pb-Pc D) Pbarrow_forwardWhat happens to the deadweight loss and taxrevenue when a tax is increased?arrow_forwardSubject:eco The elasticity of demand for maracas is –2.0, and the elasticity of supply is 3.0. How much will the price of maracas change with a per-unit tax of $1? Who bears the larger burden of the tax, consumers or producers?arrow_forward
- The reason which determines the elasticity of tax burden on buyers and sellers.arrow_forwardDetermine 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_forwardA tax on the sellers of coffee will increase the price of coffee paid by buyers,arrow_forward
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