Peanut butter has an upward-sloping supply curve and a downward-sloping demand curve. If a 10 cent per pound tax is increased to 15 cents, the government’s tax revenue a. increases by less than 50 percent and may even decline. b. increases by exactly 50 percent. c. increases by more than 50 percent. d. The answer depends on whether supply or demand is more elastic.

BuyFind

Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509
BuyFind

Principles of Macroeconomics (Mind...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781305971509

Solutions

Chapter 8, Problem 4CQQ
Textbook Problem

Peanut butter has an upward-sloping supply curve and a downward-sloping demand curve. If a 10 cent per pound tax is increased to 15 cents, the government’s tax revenue

a. increases by less than 50 percent and may even decline.

b. increases by exactly 50 percent.

c. increases by more than 50 percent.

d. The answer depends on whether supply or demand is more elastic.

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